Rural and community banks (RCBs) have been urged to invest in safe government and Bank of Ghana (BOG) instruments to ensure strong liquid reserves position for effective financial intermediation.

Mr. Kwadwo Aye-Kusi, Managing Director of the ARB Apex Bank, expressed concern about the growing concentration of their funds in financial institutions other than the central bank.

He warned that although these investments promised to be high yielding, unregulated concentration of funds in those institutions could lead to “an industry-wide liquidity crisis if any of such institutions experienced operational challenges.

According to a GNA report, Mr. Aye-Kusi gave the caution in an address read on his behalf at the 31st annual general meeting (AGM) of the shareholders of Amansie West Rural Bank in Antoakrom in the Amansie West District.

Mr. Aye-Kusi also spoke of significant levels of fraudulent activities by some staff of the RCBs and blamed this on the breakdown of the basic control structures embedded in the operations of the banks.

“Special mention can be made of the high level of fraudulent activities associated with susu operations through which many of our banks have lost significant amounts of depositors’ funds.”

He called for the boards of RCBs to ensure that their operational controls were effective.

Additionally, prompt and stringent punitive actions were needed to be instituted to deter everybody from doing anything criminal.

Mr. Aye-Kusi criticised the rise in non-performing loans, something, he said was indicative that their credit management practices were weak.

He said statistics from the RCBs performance report at the end of June, this year, showed that 99 banks recorded non-performing loan ratios above the five per cent benchmark, though the 13.27 per cent recorded by the RCBs industry was below the 18.77 per cent recorded by the universal banks.

He asked them to recognise that sound liquidity thrived on healthy credit management systems.

The bank announced a profit before tax of GH¢1,464,556.00 on its operations, last year.