Commercial Banks borrow K4bn from RBM
Commercial banks on Monday borrowed K4 billion from the Reserve Bank of Malawi (RBM), a sign of liquidity squeeze and struggling to meet liquidity requirements which may filter into interest rates.
Official figures from the RBM indicate that the discount window accommodation stood at K4 billion on October 7, after operating since mid-July this year without borrowing from the central bank.
The figures also indicate that seven commercial banks borrowed close to K8 billion in the interbank market—borrowing and lending between themselves—on October 7, up from a daily amount of around K1 billion early September.
Along with the rise in inter-bank volume, the RBM statistics further show that the inter-bank lending rate also shot up to an average 24.9 percent on October 7, from as low as 16 percent early September.
Similarly, commercial bank deposits as reflected by the required reserves have recently dwindled with the RBM figures indicating that required reserves—a fraction of bank deposits—declined to K42.7 billion on October 7 to K42.9 billion on September 9.
The apparent worsening liquidity coupled with the rising inter-bank lending rates casts fears that commercial bank base lending rates will remain at the current exorbitant rates—around 38 percent, making consumers and businesses continue to struggle to access finances or pay existing loans.
RBM spokesperson Mbane Ngwira in a telephone interview on Tuesday asked for more time to give a substantive comment.
The central bank introduced a non-collateralised window borrowing on June 1 2012, to help banks with liquidity problems patch up their liquidity gaps.
But recently the RBM Governor Charles Chuka was quoted in The Nation saying the central bank will not extend the non-collateralised window this year warning them to be more careful.
Recently, the economy experienced an improvement in liquidity due to factors including farm produce sales.
The RBM July 2013 economic review also noted that the liquidity situation considerably improved in July 2013 mainly on account of fiscal operations following the approval of the 2013/14 national budget and injections from net foreign exchange operations.
The RBM review noted that volumes exchanged on the inter-bank market declined to K1.9 billion from K2.8 billion in the preceding month as many banks were fairly liquid and the weighted average inter-bank rate lost 512 basis points to close the review month at 24.18 percent.
