Walter Wafula
10 October 2007
Kampala — COMMERCIAL banks that charge interest rates higher than the recommended 18.8 per cent on loans will be dealt with, the Bank of Uganda has warned.
"As Governor, I shall not hesitate to take legal measures to halt this unacceptable practice by financial institutions if they do not heed to the moral situation which I have started as Bank of Uganda," Mr Emmanuel Tumusiime Mutebile said in a speech read by Ms Justine Bagyenda, the Executive Director for Supervision.
He made the comments at a function to lay the foundation stone for the new headquarters of Centenary Bank on Sunday. "Bank of Uganda finds no justifiable reason why some financial institutions still charge these high interest rates and bank charges."
Many financial institutions charge between 20 and 24 per cent on loans given to the public contrary to what BoU's recommended rate. Some banks charge higher prime lending rates depending on the risk of the borrower in relation to the possibility that he/she will pay back the loan.
However, Mr Mutebile was grateful to some intuitions, which have adhered to the law and lowered their interest rates.
"We extend our gratitude to those banks that have heeded to our call to reduce these charges," he said.
He also called upon financial institutions to support the Central Bank's efforts to ensure that coins are circulated to support smaller transactions.
Though BoU issues Shs5, Shs10, and Shs20 coins, most banks only circulate coins in the range of Shs50, Shs100, Shs200 and Shs500.
This among other factors has forced many traders to increase the prices of commodities that would cost less due to scarcity of the smaller denominations.
Centenary Bank has embarked on the construction of the $14 million (Shs24.5 billion) 12-storey Mapeera House opposite the Constitution Square on Kampala Road.
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