Banks react to policy rate cut

By William Kumwembe:

Commercial banks in the country have started lowering their base lending rates in reaction to the Reserve Bank of Malawi’s (RBM) recent downward revision of the policy rate.

As we went to press, two of the country’s 11 commercial banks, Standard Bank and MyBucks Banking Corporation, had announced to have restructured their interest rates.

MyBuck’s maximum lending interest rate to its borrowers will be 25.5 percent, down from 26.6 percent according to a statement issued Wednesday.

The bank says the specific interest rate applicable to individual borrowers will depend on perceived credit risks associated with the individual borrowers, as well as specific categories of credit facilities.

In a separate statement, Standard Bank announced that it has adjusted its Base Lending Rate from 14.9 percent to 13.9 percent.

The bank has revised its Maximum Lending Rate from 25.9 percent to 24.9 percent, saying that rates for savings, call and fixed deposits would remain unchanged.

Borrowers from commercial banks and other micro finance institutions expected to heave a sigh of relief following the slash in the policy rate — a key driver of interest rates on loans — last week.

Commentators have been lamenting that, traditionally, commercial banks react more swiftly to a policy rate raise than slash.

At the end of the second Monetary Policy Committee (MPC) meeting earlier this month, MPC Chairperson and RBM Governor, Dalitso Kabambe, announced the policy rate slash by 100 basis points from 14.5 to 13.5 percent.

The move should help in making more credit available and cheaper to firms and households.

In a recent interview, Economics Association of Malawi President , Chikumbutso Kalilombe, said, while the policy rate cut was expected, it could only be meaningful if results in affordability of credit.

The recent policy rate cut was second in five months.

In January, RBM also announced to have cut the indicative cost of money by 1.5 percentage points, from 16 percent to 14.5 percent.

RBM, however, this time around maintained the Lombard rate at 0.4 percentage points above the policy rate, the Liquidity Reserve Requirement (LRR) on local currency deposits at 5 percent and the LRR on foreign currency at 3.75 percent.