Banks borrowed Shs330b from BoU to meet financing needs
What you need to know:
- The borrowing, provided under the Standard Lending Facility, seeks to create a safe buffer for banks facing financing gaps, many of which are recovering from the effects of Covid-19
Commercial banks borrowed Shs330b from the Central Bank to meet financing needs during the quarter ended January, according to Bank of Uganda.
The borrowing, provided under the Standard Lending Facility, seeks to create a safe buffer for banks facing financing gaps, many of which are recovering from the effects of Covid-19.
The Standard Lending Facility is a vital window through which banks and non-bank financial institutions borrow to meet financing needs.
In the February Bank of Uganda Monetary Policy Report, the Central Bank said: “In the quarter ended January 2022, commercial banks accessed Shs330b through the Standard Lending Facility.”
However, the Central Bank does not indicate which bank accessed the financing.
Bank of Uganda had last highlighted borrowing under the Standing Lending Facility in March 2021, during which three banks, which it did not name, had borrowed Shs155b to address short term liquidity needs.
In April 2020, the Central Bank created different financing windows through which constrained commercial banks could access financing to wade through Covid-19 disruptions.
The facilities had been created under the Covid-19 Liquidity Assistance Programme to mitigate challenges occasioned by Covid-19 such possible increase in non-performing loans and reduction in income.
Other facilities such as the Emergency Liquidity Assistance, which was approved by Bank of Uganda in April 2021, were created to support banking institutions that were threatened with liquidity stress.
The facilities had been given timelines but some of them continue to operate due to existing uncertainties.
During the period ended January, the Bank of Uganda also indicated interbank lending which stood at 6.9 percent remained well anchored around the Central Bank Rate, which has in the last few months been maintained at 6.5 percent.
Interbank lending
During the period ended January, Bank of Uganda indicated interbank lending which stood at 6.9 percent remained well anchored around the CBR, which has in the last few months been maintained at 6.5 percent.
