Commercial banks raise base lending rate to 25%
Commercial banks have raised reference rate or the base lending rate by 10 basis points to 25 percent following Reserve Bank of Malawi’s (RBM) hiking of the Liquidity Reserve Requirement (LRR) ratio on domestic deposits.
The banks have hiked their reference rate three days after RBM Monetary Policy Committee on Friday hiked the LRR ratio for domestic currency deposits to 8.75 percent to address “the rapid expansion in money supply”.
Commercial banks have in separate statements notified their customers of the change in reference rate from Monday May 6.
Reads a statement from Standard Bank plc: “We wish to inform you that the reference rate, which is also the base lending rate, for May is 25 percent from 24.90 percent in 2024.”
Speaking in an interview, Malawi Confederation of Chambers of Commerce and Industry manufacturing committee chairperson Godwin Ng’oma said the industry is yet to calculate the impact of the adjustment, adding that any lending rate rise is negative to the real sector.
He said: “We think the response from banks has come quite early just after two to three days, but the industry was expecting this because whichever instrument the RBM chooses to use between the policy rate and LRR ratio, there should be an impact.”
But Consumers Association of Malawi executive director John Kapito said the raise is confusing coming at a time inflation rate is decelerating.
RBM has forecast 2024 annual inflation at 30 percent and upside risks to the inflation outlook.
