Consumers Association of Malawi (Cama) says it expects commercial banks to respond with urgency by reducing lending rates following a cut in policy rate by the Reserve Bank of Malawi (RBM).
Last Wednesday, the central bank reduced the policy rate—the rate at which commercial banks borrow from the central bank as a lender of last resort—by four percentage points to 18 percent from 22 percent.
In a statement yesterday, Cama executive director John Kapito noted that commercial banks have in the past delayed to pass on the benefits of policy rate reduction to the consumers.
He said: “Our advice to commercial banks is that as consumers, we demand that the reduced interest rates are implemented with the same utmost speed as the way they adjust them when the policy rate has been increased.
“Our continued observation has been that commercial banks are quick to adjust upwards and slow when there is a reduction. It is, therefore, incumbent upon all consumers to monitor and ensure that the banks have immediately reduced their interest rates.”
Currently, bank interest rates are hovering around 32 percent, which is a spread of 14 percentage points from the policy rate.
Kapito appealed to the central bank to monitor the behaviour and practice of banks to ensure that the policy rate reduction has been passed on to consumers.
Last week, Malawi Confederation of Chambers of Commerce and Industry (MCCCI) chief executive officer Chancellor Kaferapanjira warned that it will push RBM to put a cap on interest rate if banks do not reduce their lending rates in line with the policy rate.
“We are saying if commercial banks do not respond to the signals of the central bank, then we will keep pushing the central bank to put a cap on interest rates so that commercial banks are disciplined to reduce their overheads, most of which are in perks” he said.