DISCOUNT RATE REDUCTION SHOULD MAKE BANKS THINK ABOUT LENDING RATES
The Bank of Tanzania Governor, Prof. Benno Ndulu, has urged banks and financial institutions to take note of the downward review of the discount rate from 16 per cent to 12 per cent in their operations.
“The Bank of Tanzania’s expectations are that the move will enhance credit growth and reduction in lending rates, he said.
Prof. Ndulu made the call during a meeting with chief executive officers (CEOs) of banks and financial institutions at the Bank of Tanzania headquarters in Dar es Salaam.
He, however, cautioned them, when disbursing loans, to ensure that only customers with good track record are being considered. This is due to the recent increase in non-performing loans (NPLs) among many banks.
The Bank of Tanzania reviewed the discount rate from 16 to 12 per cent effective from March 6, 2017. In its letter to banks, the Bank said the revised discount rate took into account the prevailing 91 and 182-day weighted average yields and the monetary policy stance geared towards sustaining price stability. It will also be used to discount Treasury securities.
On their part, CEOs of banks and financial institutions sought assurance from BoT as to the duration of being in force of the newly announced discount rate, lest they adjust their loan policies only for the discount rate to move upward without a warning.