Interests on loans to drop if … – Nana Otuo Acheampong

Some financial analysts are anticipating that the Bank of Ghana (BoG) will sustain the decision to reduce further, its policy rate to ease access to credit to businesses.

According to them, commercial banks will respond to calls for lower interest rates if the primary reference which is the policy rate, drops.

“It is in the right direction and we hope that it will continue and we will see lower interest rates because businesses presently are finding credit very expensive,” Nana Otuo Acheampong, Banking Consultant told citibusinessews.com.

The Monetary Policy Committee (MPC) of the Bank of Ghana, on Monday reduced the prime rate which is the rate at which the central bank lends to commercial banks in the country.

The Governor of the Central Bank, Dr. Abdul Nashir Isshaku cited the cedi stabilization and reducing inflation as basis for the decline in the policy rate.

The figure which had been kept unchanged at 26 percent for four consecutive times this year, declined by 50 basis points to 25.5 percent.

Like other analysts, Nana Otuo Acheampong further ruled out a significant impact of the reduction on interests on loans.

He explained the factors determining the base rates would eventually culminate in a figure that will be equal or above the new policy rate.

“Banks are now going to add on their risk factors for lenders so we wouldn’t see a big reduction in the lending rate for the banks to enable businesses to generate the required turn over that we want to see.”

Meanwhile the Head of the Osei Tutu II Centre for Executive Education and Research is optimistic commercial banks could lessen their stance on restricting credit if the MPC reduces the prime rate subsequently.

“With the non performing loans structure that the banks encountered last year, they are not lending much and that was expressed in the report that the Governor read to the press that credit is very tight,” he concluded.

By: Pius Amihere Eduku/citibusinessnews.com/Ghana