Gov’t pushes for interest rates cut
Loading ...Government has urged all universal banks as well as savings and loans companies to reduce their interest rates.
The call was made after government realized that high interest rates are killing businesses, especially small and medium scale enterprises (SMEs) which constitute about 70 percent of businesses in the country.
Deputy Minister of Finance and Economic Planning, Professor George Gyan-Baffour says the spread between lending and borrowing are still too high, depriving most SMEs access to finance since the high interest rates appears with several negative risks.
Commissioning the official operation of Bank of Baroda Ghana, a subsidiary of Bank of Baroda International, an India Bank with presence across the globe, Professor Gyan-Baffour said though the Central Bank’s prime rate has for the last two years seen some reduction to the current rate of 13. 5 percent, interest rates which are currently pegged between 22 to 34 percent rates are still too high.
The call by the Deputy Minister is expected to urge the Bank of Ghana to force the financial intermediaries to cut their rates.
Just a few days ago, the Federal Reserve of the United States of America cut interest rates for the second time in nine days, from 3.5 percent to 3 percent, far lower than Ghana’s rate, in order to keep the economy from entering a recession. This was also followed by the Bank of England which cut rates by a quarter point to 5.25 percent.
Professor Gyan-Baffour also welcomed the Credit Reporting Law, which according to him will give the financial institutions confidence in lending monies since the credit worthiness of borrowers could easily be identified.
He pointed out that government will continue to give support to all new and existing banks, adding that the emergence of new banks is a clear manifestation of government’s willingness to use the financial intermediaries as the benchmark towards economic development.
For his part, Dr. Paul Acquah, Governor of the Bank of Ghana said his outfit has introduced a new electronic-based surveillance and monitoring system that will ensure regulatory compliance.
This according to him is a better way to secure the soundness of the financial system in a rapidly growing industry.
The policy of the Bank of Ghana is to strategically position the financial sector to broaden and diversify the credit markets, and prepare for the opportunities and challenges ahead as Ghana grows into a middle income country, he added.
He reiterated that increased capitalization of the banks will broaden the scope of intermediation and capacity of the banks to support a growing and diversified loan portfolio.
Bank of Baroda is one of the largest banks in India with 2,800 branches and 66 overseas offices spreading across 24 countries.
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