The Bank of Ghana (BoG) would abolish the secondary reserve requirement for banks with effect from August 1, 2006.
Currently, Banks are required to hold 9.0 per cent of their eligible deposits as primary reserves at the Central Bank. In addition, banks are required to hold 15.0 per cent of their eligible deposits as secondary reserves, in the form of treasury bills and medium term government securities.
The secondary reserve requirement has consistently been on the decline, falling from 35.0 per cent to 15.0 per cent in July 2005.
A statement from the Public Affairs Unit of the Central Bank said the primary reserve requirement would continue to be 9.0 per cent against both domestic currency and foreign currency deposits.
The high level of reserve requirements was the legacy of high fiscal deficits and the need for the Government to have a captive market to finance these deficits.
The BoG was making the adjustment to reflect the changes in the economic fundamentals of the country because of prudent fiscal and monetary policy.
Commenting on the decision of the BoG, Finance Minister Kwadwo Baah-Wiredu said the move was encouraging, as it would make more money available for on-lending to the Private Sector.
He expressed the hope that beneficiaries of such loans would pay back in time to instil confidence in the banks to give out more.