Lending Rates Still At 33 Per cent

Lending rates of banks continue to remain high despite the Bank of Ghana (BoG) adjusting its policy rate-the prime rate from 18 percent to 16 percent in February this year, according to the latest Annual Percentage Rates (APR) and Average Interest (AI) released on Friday by the Central Bank.

Market watchers, analysts and economists have argued that the banks did not really comply with interest rates cut announced by the Central Bank.

According to the APR figures on vehicle, mortgage and other consumer credit loans, banks were still charging very high interest rates at an average of 33 percent despite borrowing at 16 percent from February to mid April 2010.

This development still keeps Ghana as one of the few countries in Africa with high interest rates that hover around an average of 33 percent, while 91-days Treasury Bill is 15 percent. Benchmark Treasury bill for Botswana, Kenya, South Africa, Uganda, and Nigeria are 7.14, 6.22, 7.07, 4.76 and 3.22 percent respectively.

Inflation eased for nine consecutive months, recording 13.32 percent in March but analyst say inflationary pressures could still re-emerge. They stated that inflationary pressures could re-emerge during the second quarter till the end of the year because of an increase in public spending as indicated in the 2010 Budget, anticipated wage demand pressures, increase in taxes, which could cause prices of items to rise and external factors such as rise in price of crude oil.

According to the APR figures, SG SSB offered the best lending rates after all the banks were surveyed. It offered 27.01 percent for mortgage and other consumer credit and charged 27.91 percent for vehicle loans.

But the bank paid an interest rate of 10.89 percent on deposits.This indicates that the excessive interest spread between lending and deposit rates is still high as lending rates are now three and half times higher than deposit rates compared with the previous figure.

SG SSB, Bank of Baroda, GT Bank and Standard Chartered Bank offered the best competitive rates for vehicle and mortgage loans. While Bank of Baroda, GT Bank and Stanchart offered rates of 29.75, 29.92 and 30.40 percent respectively, SG-SSB provided a rate of 27.01 percent.

Conversely, The Trust Bank, Barclays and UT Bank charged the most expensive rates of 37.81, 37.47 and 36.77 percent respectively for vehicle and mortgage loans.

With regards to consumer credit, SG SSB, Bank of Baroda, Stanchart and GT Bank offered the best competitive rates of 27.01, 29.75, 30.42 and 30.92 percent respectively.

However, TTB, Barclays and UT Bank charged expensive rates of 37.81, 37.47 and 36.77 percent respectively. On the Average Interest (AI), which monitors the deposit rates of the financial intermediaries, the National Investment Bank, Stanbic and Merchant offered the best deposit rates of 16.75, 15.17 and 14.71 percent respectively.

On the other hand, International Commercial Bank (ICB), Intercontinental Bank, HFC and Prudential Bank offered the least rates of 7.67, 8.40, 9.33, 9.59 percent respectively on deposits.

APR shows the true interest rate and charges that reflect the true cost of borrowings levied by the banks.
The regular publication of the APR is seen by many analysts as a welcome development since it would force the banks to charge rates in line with their base rates, thus heightening competition in the industry.

Source: D-Guide/ghana