Banks responding to COVID-19 very well – Lord Mensah


Commercial banks in Ghana are responding very well to the effect of the coronavirus outbreak on the economy with the 2% reduction in interest rates, a senior lecturer at the University of Ghana Business School (UGBS), Dr Lord Mensah,has said.

The banks have announced reduction in interest rates on loans by 2% as part of efforts to mitigate the financial impact of the coronavirus.

In a statement, the Ghana Association of Bankers said “Banks agree to a general 200 basis points interest rate cut on all existing local currency denominated loans and for all new loans to be sanctioned by member banks.

“This rate cut shall cover not only the period of the pandemic but banks recognize that it will take businesses and individuals sometime after the end of the pandemic to retool and restock to achieve the semblance of normalcy – the rate cut will therefore cover the remaining tenor of the facility.”

It added: “Given the sanctity of customer/data privacy issues, banks have agreed to hold bi-lateral discussions with customers who have loan exposures with respective banks so a more tailor-made solution can be agreed with their bankers

“We advise customers to exercise restraint during this exercise as delays may be expected as banks will be using existing lean staff on roll to begin individual discussions on loan extensions, restructuring or other solutions respective banks will proffer to lessen the impact the virus may have caused,” the statement emphasised.

The statement noted that “We have also decided to make the switch less painful and financially advantageous. Most fees on digital and other alternate banking channels have either been scrapped during this period or significantly reduced so that customers do not have to make financial decisions on whether to switch to an alternate platform or not.

“The association urged customers to embrace digital banking to ease their transactions in these abnormal times.”

Reacting to this development in an interview with TV3’s Alfred Ocansey on Monday April 6, Dr Mensah this was expected given the effects of the coronavirus outbreak on the economy.

“Obviously times like these you expect cut down of rates from all directions.

“If you look at the 200 basic points in addition to the MPR rate which is about 150 basic point, it gives you the signal that we are responding to this coronavirus.”

He however noted that businesses and individuals are likely to benefit from the recent 2% interest rate reduction if only the commercial banks are highly liquid.

He explained that it is only when the banks have demonstrated that they are liquid that businesses and individuals will have the confidence to go for loans.

“As to whether individuals or businesses will have the confidence to go the banks depends on the business environment and then also it depends on how liquid the banks are.

“You may review the interest rate but as to whether that will feed into how businesses and individuals will walk to the banks to prop up the economy depends on whether the banks are liquid.”

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Source Author: Laud Business