Banks cut interest rate by 200 basis points to mitigate impact of COVID-19

The Ghana Association of Bankers has announced a cut in its benchmark interest rate by 200 basis points to mitigate the economic impact of COVID-19 on businesses and individuals.

In a statement, the Association also announced a three billion cedis support package by way of loans to players in Ghana’s pharmaceutical industry.

The 200 basis points reduction in interest rate translates to a 2 percent reduction on bank loans.

Prior to this announcement, the Bank of Ghana had reduced the Monetary Police Rate from 16 to 14.5%, to enable banks reduce interest rate in the wake of the challenges posed by the COVID-19 outbreak.

The Republic Bank for instance has offered a six-month break to staff and customers with outstanding loans to ease their pressure. Prior this decision by the Ghana Association of Bankers, they had also announced a support package of ten million cedis towards the government’s COVID-19 fight.

A statement signed by the Chief Executive Officer of the Association, D. K. Mensah, said the interest rate cut affects all existing local currency denominated loans and for all new loans to be sanctioned by member banks.

“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.”

Among other interventions, the Association noted that, “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 added.

They have further urged customers to switch to available digital banking platforms during this period, to enable banking halls to handle limited banking services.

“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,it noted.

Following the outbreak of the virus business activities across the world has fallen sharply in addition to disruptions in supply chains, dragging down commodity prices.