22 August 2017

Zambia: Banks Cut Lending Rates

ALL the 18 commercial banks currently operating in Zambia have reduced the lending interest by at least 1.5 per cent following the reduction of the Monetary Policy Rate (MPR) a fortnight ago.

The Bank of Zambia (BoZ) recently reduced the policy rate by 150 basis points to 11 per cent from 12.5 per cent.

According to the Bankers Association of Zambia (BAZ) all 18 member banks of the association, had effected the interest rates adjustment downwards.

Following the suspension of operations for Intermarket Bank, there are currently 18 commercial banks operating in the country.

BAZ public relations officer Miriam Zimba said in Lusaka yesterday that all the banks had already reduced the interest rate for all loans tied to the MPR.

"We have every confident that customers have begun receiving messages from their respective bank branches... and public announcements have also been made by the banks through the various media-print and electronic," she said.

She said the adjustment of the interest rates should be able to give creditors some form of relief as they begin benefiting from this reduction, which was immediate.

Ms Zimba said the association was delighted that the Central Bank had reduced the monetary policy rate by 150 basis points to 11 per cent and the statutory reserve ratio by 300 basis points to 9.5 per cent from 12.5 per cent.

She said, with the reduction in the MPR, all loans in the banking sector which were linked to it, will see interest rates scaled down by 150 basis points.

"And as we go into the fourth quarter of 2017, long dated highly priced deposits will start maturing and the prevailing rates on the market shall take effect," she said.

Ms Zimba said this would set a new benchmark at which commercial banks were expected to price their loan books, while recognising that banks have different balance sheets, cost structures and risk appetites which ultimately determine their acceptable interest margins.

With the pumping in of more liquidity into the market through the reduction in the Statutory Reserve Ratio by 300 basis points to 9.5 per cent from 12.5 per cent, Ms Zimba said the cost of funds in the market was expected to reduce.

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