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Banks slow on policy stance

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MOST commercial banks are yet to react to the recent policy rate cut by the Reserve Bank of Malawi (RBM) and some economic commentators are describing the development as a deliberate move from financial institutions to continue profiteering.

Last week, RBM announced a cut in the bank rate from 22 percent to 18 percent. RBM Governor, Dalitso Kabambe, said the move will help the bank achieve its goal to hit single digit inflation by December this year.

But most commercial banks are yet to respond to the new policy stance from RBM attracting displeasure from most stakeholders, including business operators.

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As at close of business on Tuesday, only two of the nine registered commercial banks had made adjustments to their base lending rates.

In separate statements, Malawi Stock Exchange (MSE) listed National Bank of Malawi (NBM) and FDH Bank announced on Tuesday a cut in their base rates to 27.5 percent.

In a written response to a questionnaire, president of the Small and Medium Enterprises Associ a tion (Smea), James Chiutsi, faulted commercial banks for delaying to react when RBM effects bank rate cuts.

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“We have noted that this seems to be the practice. Each time RBM reduces the policy rate, our hopes as SMEs are raised, but delayed action on the part of commercial banks, whatever the justification, is retrogressive,” he said.

He said in contrast, the banks act swiftly when there is a rate rise, a move which raises eye brows among business operators.

He said the delay to bring down interest rates makes it hard for the business operators to be competitive.

“We trade on the same market with international competitors who are able to access loans at a relatively lower rate,” he said.

In a recent interview, Chief Executive Officer of the Malawi Confederation of Chambers of Commerce and Industry (MCCCI), Chancellor Kaferapanjira, pleaded with the banks to react swiftly to the rate cut.

He further suggested that when reacting, the bank borrowing rate cuts should be proportionate to the reduction in the policy rate.

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