Banks soften lending rates

Commercial banks in the country have lowered their base lending rates in reaction to the Reserve Bank of Malawi’s (RBM) recent monetary policy measures, including the downward revision of the policy and Lombard rates.

Out of the country’s 11 commercial banks, Standard Bank plc, National Bank of Malawi plc, FDH Bank NBS Bank plc, CDH Investment Bank, First Capital Bank plc and New Finance Bank (NFB) have restructured their interest rates.

Most of the country’s commercial banks have revised downwards their lending rates

The banks have realigned their base lending rates to a minimum of 14.9 percent and a maximum of 26 percent. Depending on the product and customer, this means lending rates will be between 14.9 percent and a maximum of around 26 percent.

This means that the cost of borrowing has gone down and the move also gives respite to companies and individuals servicing loans with the banks.

The rate cut could also help consumers to save money by reducing interest payments on certain types of financing.

The revision follows RBM Governor Dalitso Kabambe’s announcement at a press conference in Blantyre a fortnight ago of a reduction in the policy rate from 16 percent to 14.5 percent and Lombard Rate from 200 basis points to 40 basis points above the policy rate to 14.9 percent.

The central bank further instructed banks to use the Lombard rate as the base lending rate.

RBM spokesperson Mbane Ngwira said in an interview yesterday that the swift response ensures effectiveness of the monetary policy and implies that the changes are passed on to the consumers immediately

He said: “The move by banks is in line with expectations of monetary authorities. We have indeed seen banks respond swiftly to the MPC decision although with different effective dates which reflects the different cost of structure.”

Over the years, consumers and economic commentators have raised concerns on the wide margin between the depositors and borrowers rate, wondering why banks are not willing to balance the margin.

Member of Parliament for Dowa West, Alexander Kusamba Dzonzi, who tabled the Interest Capping Bill, earlier told Business News that the move by RBM is an indication that the country needs and can progress with lower interest rates.

On his part, Consumers Association of Malawi (Cama) executive director John Kapito said consumers have high hopes and are keen to see positive outcomes from the MPC measures and to see RBM continuing to monitor commercial banks.

“The central bank has responded to most of the things we were talking and worried about. What we need to see is banks to be more friendly and the central bank to continue monitoring the market to ensure that the benefits are passed on to the consumers,” he said.

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