April, 06, 2010

Commercial banks have shrugged off efforts by Central Bank to have them cut their interest rates, citing the cost of funds and level of risk— dashing borrowers’ hopes for cheaper credit.The Central Bank has made determined efforts to push down lending rates by cutting its rate to the current level of 6.75 per cent but banks, in a new CBK survey, have cited it as playing a very small role in lending rate determination.

While the Central Bank Rate drop has succeeded in pushing down rates at which the government borrows from the private sector through T-bill auctions as well as decline in rates that banks lend to each other, it has had no impact on private sector base lending rate that currently stands at nearly 15 per cent, about the same level as when the CBR was nine per cent in December 2008.

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