By Peter OBIORA InvestAdvocate

Lagos (INVESTADVOCATE)-The Central Bank of Nigeria (CBN) Thursday announced that severe sanctions awaits defaulting banks on the newly introduced 50 percent (50%) cash reserve requirement (CRR) on all public funds deposits in the banks.

This is contained in a circular with reference number BSD/DIR/GEN/LAB/06/034 dated July 25, 2013 and signed by Benjamin Fakunle for Director of Banking Supervision of the CBN.

Also, the CBN said the implementation of these decisions will take effect from the next CRR maintenance period commencing August 7, 2013 and warned banks to comply strictly with the directive.

Part of the circular reads thus: “Also, the remuneration on “excess” above the cash reserve requirement of 8% is discontinued forthwith.

The implementation of these decisions will take effect from the next CRR maintenance period commencing August 7, 2013.

In order to enhance the rendition of returns on Government deposits, banks are henceforth required to separately report the details of Federal, State and Local Government deposits as additional memorandum items in their Monthly Bank Return/Daily Bank Return (MBR 300/DBR 300). This is without prejudice to other returns on deposit.

Please note that the CBN will closely monitor the implementation of these decisions. Banks are therefore enjoined to ensure strict compliance with this directive and render their reports transparently and accurately as any deviation will attract SEVERE sanction,” the CBN said.

Nigeria’s Central Bank Tuesday introduced a 50% CRR on all public funds deposits in the banks.

The CRR is a monetary policy tool used to set the minimum deposits commercial banks must hold as reserves rather than lend out, it also ensures the liquidity and solvency of banks.

CRR is usually applied to influence borrowing and interest rates by changing the amount of money in banks’ disposal to make loans.