Discount window temporary, says RBM
The Reserve Bank of Malawi (RBM) has said the discount window accommodation as indicated by the central bank’s statistics was only temporary and meant to realign the market.
RBM spokesperson Mbane Ngwira said in a telephone interview on Tuesday the banking system has sufficient liquidity and it is not necessary for commercial banks to borrow from the central bank through the discount window.
RBM’s daily financial statistics for October 7 indicate that the RBM discount window accommodated K4 billion, an indication that the commercial banks might have borrowed from the central bank to ease their liquidity problems.
However, the RBM spokesperson noted that the market had shortage of about K4.5 billion on the previous day and the accommodation had to ensure that the system operates smoothly.
“The banking system has sufficient liquidity and there is no reason commercial banks should borrow from the RBM. If some banks have liquidity shortages, they can borrow from other commercial banks on the interbank market,” said Ngwira.
The statistics also indicate that seven commercial banks borrowed close to K8 billion in the interbank market—borrowing and lending between themselves on the previous day—as indicated by the RBM’s October 7 report.
Along with the rise in interbank volume, the RBM statistics further show that the interbank lending rate also shot up to an average 24.9 percent on October 7, from as low as 16 percent early September.
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, RBM Governor Charles Chuka was quoted in The Nation, saying the central bank will not extend the non-collateralised window this year warning commercial banks to be more careful.
