The Banking Industry’s Non-Performing Loans (NPLs) increased by 1.3% to reach GH¢20.7 billion in June 2025.

This marks a marginal rise from GH¢20.4 billion in June 2024, representing a 49.4% year-on-year growth, despite a decline in the share of foreign currency NPLs.

According to the July 2025 MPC report by the Bank of Ghana, the industry’s asset quality appears to be improving during the review period.

The NPL ratio declined to 23.1% in June 2025 from 24.2% a year earlier.

When the fully provisioned loan loss category is adjusted for, the industry’s NPL ratio falls further to 8.5 per cent from 10.8 per cent, reflecting a reduction in sub-standard non-performing loans.

“The decline in the NPL ratio during the period under review is explained by the lower growth in the NPL stock relative to the growth in total loans,” the Bank of Ghana noted.

Breakdown and Drivers

The private sector continued to account for the bulk of non-performing loans, as it remains the largest recipient of the industry’s credit. The proportion of NPLs attributable to the private sector rose slightly to 96.4 per cent in June 2025 from 95.6% in June 2024, while the public sector share declined to 3.6% from 4.4%.

The commerce and finance, and the agriculture, forestry, and fishing sectors recorded increases in their NPL ratios, while the manufacturing sector’s ratio remained unchanged compared with June 2024.

The commerce and finance sector recorded the highest NPL ratio of 27.0% (up from 19.7% a year ago), followed by the services sector with 25.7% (down from 26.6% a year earlier).

Impact

Industry watchers are expressing concern about the implications of rising NPLs on efforts to lower lending rates. Financial institutions often factor current NPL ratios or borrower payment delays into loan pricing. Some affected businesses told Joy Business they cannot be blamed for delayed loan repayments, citing government payment arrears as a contributing factor.

Checking High NPLs

Earlier this year, the Bank of Ghana announced new measures to address high non-performing loans, citing risks to the banking industry’s profitability, liquidity, solvency, and overall financial stability.

The Central Bank stated that the NPL-to-gross loan ratio should not exceed 10 per cent, or such levels as prescribed by the regulator. Microfinance institutions are to continue observing their existing prudential limits on non-performing loans.

Targeting Loan Defaulters

As part of the new measures, the Bank of Ghana has directed commercial banks to blacklist willful defaulters in their audited financial statements, including a sectoral breakdown of NPL exposures.

“Commercial banks are also required to restrict further credit to strategic or willful defaulters and share their identities with key financial sector oversight bodies,” the Central Bank added.

Banks are expected to cap their NPL ratios at 10% of gross loans by December 2026.

Profits of Commercial Banks

The July 2025 MPC report indicated that the banking industry remained profitable in the first half of 2025, recording higher profit-before-tax (PBT) and profit-after-tax (PAT) compared to the same period in 2024.

Profit-after-tax increased by 32.6% to GH¢7.2 billion in June 2025, up from a 25.5% growth in June 2024. Profit-before-tax rose by 32.2% to GH¢10.8% from GH¢8.1 billion the previous year.

The growth in profits was driven by higher interest income and other revenue streams. Overall, the sector recorded a stronger performance in the first six months of 2025, supported by growth in total assets and deposits. Financial Soundness Indicators (FSIs) showed improved solvency, efficiency, and asset quality, although liquidity levels moderated.

Outlook

The Bank of Ghana noted that solvency and efficiency indicators point to relative improvement. The outlook for the industry remains stable, with recapitalisation, stronger credit underwriting standards, and intensified loan recovery efforts expected to drive performance going forward.