Commercial Banks must seek to grow their customer base if they are to remain profitable, said Governor Bank of Uganda Emmanuel Tumusiime Mutebile.
Governor Mutebile was on Wednesday presiding over the opening of the 14th branch of Bank of Baroda in Industrial Area in Kampala.
"A total of 32 new bank branches have so far opened up in Uganda this year, with Bank of Baroda among those at the forefront of this growth. We now have 500 bank branches throughout the country," said Mutebile.
He added that this extension of banks branch networks will also generate large social benefits by promoting greater financial inclusion. Financial inclusion is an important tool for supporting economic development and improving living standards.
"The last two years have been very challenging for economic management in Uganda. The large supply side shocks to inflation which occurred last year necessitated a tough monetary policy response on the part of Bank of Uganda," he said
He noted that this made the Central Bank increase its lending rate by 10 percent in the second half of 2011 to 23 percent.
The Monetary Policy has proven successful in bringing down inflation to 4.8 percent in September 2012. This is expected to remain at 5 percent for the rest of this year and the first half of next year.
Mutebile noted that average commercial banks' lending rate on the shilling denominated loans was still as high as 26 percent in August.
"Bank of Baroda (Uganda) has been providing uninterrupted service to the people of Uganda for nearly 6 decades," said the Managing Director, Ashok Kumar.
He pointed out that their parent bank in India has completed 105 years. In Uganda, we shall be celebrating 59 years.
"As we see the inflation has gone down, we have decided to reduce our interest rate to 21 percent effectively from November 1," he said.
He noted that with prudent Monetary Policy adopted by Bank of Uganda, inflation has been brought down from 20.50 percent in October 2011 to 5.40 percent in September 2012.
Kumar said that Industrial Area in Kampala has more than 100 offices and manufacturing units of various industries. The diversity gives uniqueness to the area.