Stanbic Bank has announced a reduction of its prime lending rate, from 24 per cent to 23 per cent per annum
Stanbic Bank has announced a reduction of its prime lending rate, from 24 per cent to 23 per cent per annum.
The new rate, which the bank has posted on its Website, will take effect on August 1st, 2016.
It will apply to loans denominated in Uganda Shillings.
Prime lending rate, according to businessdictionary.com is the interest rate banks charge their creditworthy customers for short–term loans.
Stanbic Bank, the largest – by assets – commercial bank in Uganda becomes the second bank after NC Bank to reduce its prime lending rate.
NC Bank reduced its prime lending rate from 25 percent to 24 percent per annum.
The bank said through a notice that the reduction is in line with current market conditions.
NC’s will start implementing the new lending rate on July 25, 2016.
“This change shall apply to both existing and new facilities,” the notice added.
An economist who requested not to be name to speak freely said the reductions mean ‘it is cheaper to borrow’.
“One percentage point might not appear enticing,” the economist said, adding, “But it is a movement in the right direction.”
Both Stanbic bank and NC bank’s decisions to reduce their prime lending rate come on the heels of the Bank of Uganda (BoU’s) decision to lower the Central Bank Rate (CBR) from 16 per cent to 15 per cent.
BoU’s June 13 decision was informed by forecasts that inflation is likely to fall to the policy target of five percent over the next 12 months.
During the State of the Nation Address on May 31, President Museveni complained about commercial banks high interest rates.
“I wanted to see whether the involvement of the private sector in Banks, would lower the interest rates because of “competition” and the “efficiency” of private actors. Well, the facts show that it has not,” Mr Museveni said then.
“Even when the inflation rate is 5 per cent, the [commercial] banks lend at 23.5 per cent as of now…”
He added that the government would capitalise the Uganda Development Bank to address the issue of high interest rates.