commercial banks lower interest rates on loans
All Commercial Banks agree to lower interest rates, under pressure from the central bank. FILE PHOTO

All Commercial Banks agree to lower interest rates, under pressure from the Bank of Uganda.

Uganda Bankers Association (UBA) has confirmed the Bank of Uganda’s (BoU) suggestion to have all commercial banks and other financial institutions lower their interest rates on loans within 30 days.

Following the ongoing of coronavirus pandemic, many businesses countrywide have been hit tremendously with many Ugandans still striving hard to feed their families using their little life savings.

Individuals, more so those with loans to pay have in recent weeks also raised worries of where they are going to be getting the money from to clear these bills yet they are not working.

However, following a meeting between financial institutions on Saturday, it was suggested that banks should revise their lending rates and have them reduced within the next one month to stem effects of the economic stress caused by the Covid-19 pandemic.

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commercial banks lower interest rates on loans
All Commercial Banks agree to lower interest rates, under pressure from the central bank. FILE PHOTO

According to the UBA, chairperson, Mathias Katamba, banks are the main arteries through which monetary policy is transmitted and in challenging times like these, the membership of UBA wish to convey their unwavering commitment to do whatever is possible within their means and circumstances to support initiatives by Bank of Uganda (BoU) to stimulate economic activity.

Katamba, however, said that there is no exact percentage at which the rates would be reduced however individual financial institutions will determine what amount to deduct depending on their cost structures, assets and liabilities.

“Financial Institutions are the main arteries through which monetary policy is transmitted and in challenging times like these, the membership of UBA wish to convey their unwavering commitment to do whatever is possible within their means and circumstances to support initiatives by Bank of Uganda (BoU) to stimulate economic activity.”

“We agreed that each other and every individual member institution goes back and reviews their internal position and adjust their lending rates accordingly, based on whatever they can accommodate since institutions differ in composition and make up their cost structures, assets and liabilities,” the UBA chairperson said.

Also, he said that part of the meeting, it was also concluded that they will separately engage BoU and the government through the Ministry of Finance on specific and urgent pain points the industry is faced with that are constraining their operational efficiency, exposing them to risk and bearing to loan pricing and other tariff structure.

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According to Katamba, the industry, with guidance from BoU, is currently undertaking loan restructures for qualifying borrowers as part of the efforts to address cash flow challenges occasioned by interruptions of supply chains and overall business stress.