Almost three weeks after the Reserve Bank of Malawi (RBM) announced a reduction in policy rate— the rate at which commercial banks borrow from the central bank as lender of last resort—commercial banks in the country are yet to respond.
At the end of the latest Monitory Policy Committee meeting, RBM announced slash to the policy rate by about 150 basis points from 13.5 percent to 12 percent.
But as of Tuesday, at most all commercial banks were yet to reciprocate the central bank’s decision which was aimed at cushioning local borrowers when accessing loans from commercial banks and other financial institutions.
But Bankers Association of Malawi (Bam) Chief Executive Officer Lyness Nkungula said banks were still in talks with RBM as most of them already set their November reference rate at 13.6 percent.
Reacting, Economics Association of Malawi President Lauryn Nyasulu said she expected commercial banks to respond to the rate cut by now.
“When commercial banks are setting interest rates, they are benchmarked on the policy rate because they make reference to it and add a certain percentage so the moment the policy rate is reduced, the expectation is that commercial banks should respond,” she said.
This was echoed by the Dean of Commerce at The Polytechnic, Betchani Tchelani, who wondered if the banks would have delayed if the policy rate was revised upwards.
“Of course they are profit-oriented entities but we are still expecting that they should respond to this reduction so that it benefits their customers,” he said.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.