Uganda banks move to cut lending rates

The Bank of Uganda’s move to cut its key lending rate from 21 to 20 per cent has started yielding results with commercial banks cutting their prime rates by a percentage point on average.

Early this week, Stanbic Bank announced a cut in its prime lending dropping from 27.5 to 27 per cent, followed by Standard Chartered Bank, which eased its rates to 26.5 per cent from 27.5 per cent effective July 1.

In an email exchange Mr Lamin Manjang, the Standard Chartered managing director told Daily Monitor that after analysing the economic situation, the bank made a decision to ease its prime lending rates.

He said the reduction in the Central Bank Rate reflected in the fall in inflation had informed the bank’s assets and liability committee to marginally cut lending rates effective July 1.

Although other banks have not made formal pronouncements economic indicators suggest they will soon move in the same direction.

In an interview, Mr A R Kalan, the Crane Bank managing director, told Daily Monitor that it was only but a matter of time for other banks to cut their interest rates.

“Since the central bank has cut the CBR, we are certainly looking at cutting ours (Crane Bank). However, we are still analysing market movements.”

“If the current economic trend continues, we will surely reduce our rates. Customers should expect our rates to go down soon,” Mr Juma Kisaame, the Dfcu managing director said.

Mr Anthony Kituuka, the KCB head of corporate banking said: “The reduced CBR means that the cost of money has gone down. We will soon reduce ours (KCB). This process takes some time, with the issuance of a public notice two weeks ahead of the reduction.”

The central bank last year introduced a tight monetary policy, as it sought to curb runaway inflation which had in October peaked to 30.4 per cent.

The tight policy, according to the central bank sought to mop up excess liquidity from the money market, which had driven inflation to unprecedented levels in over two decades.