Loan rates to fall
By Praisebell Rosemond Larbi
Commercial banks in the country are expected to lower their lending rates in the coming days, following a significant drop in the Ghana Reference Rate (GRR), a benchmark used to guide loan pricing in the banking sector.
The Ghana Association of Banks, in a statement issued on August 6, 2025, announced that the GRR had declined from 23.69 percent in July to 19.67 percent in August representing a major reduction of more than four percentage points.
This development comes on the heels of a 3.0 percent cut in the Bank of Ghana’s policy rate just last week.
Speaking to the media, Chief Executive Officer of the Ghana Association of Banks, John Awuah, indicated that the revised GRR would compel commercial banks to review their lending rates downward to align with the new benchmark.
“This drop in the reference rate means that if your loan is linked to the GRR, you should expect your loan interest to reduce accordingly. We anticipate banks will begin adjusting their loan pricing structures soon,” Mr. Awuah explained.
The GRR is a standardized benchmark rate jointly introduced by the Bank of Ghana and the Ghana Association of Banks in 2017.
Its purpose is to enhance transparency in the determination of interest rates by providing a uniform base from which banks can add their risk margins.
At the time of its introduction in April 2017, the GRR was pegged at 16.82 percent. Since then, it has become a critical tool in ensuring that fluctuations in the central bank’s monetary policy rate are reflected in commercial loan pricing across the country.
The GRR is recalculated monthly using a formula that factors in the policy rate, interbank lending rates, and other macroeconomic variables.
A reduction in the policy rate, therefore, tends to result in a lower GRR, creating an expectation that commercial banks will reduce their base lending rates in response.
The recent sharp decline in the GRR has reignited the long-running discussion about the effectiveness of the central bank’s monetary policy rate in influencing the cost of credit.
According to Mr. Awuah, the impact of the new rate will largely depend on the nature of existing loan agreements.
“For borrowers with variable rate loans, that is, loans priced based on the GRR, this adjustment will directly impact their interest payments. However, fixed-rate loan holders will not see immediate changes,” he noted.
Mr. Awuah further indicated that new borrowers stand to benefit the most, as any fresh loan negotiations will be conducted using the revised lower benchmark.
“Anyone negotiating a new facility now is likely to benefit fully from this reduction in the GRR,” Mr. Awuah added.
The expected decline in lending rates comes as a relief to many businesses and individuals grappling with high financing costs amid efforts to recover from recent economic challenges.
Analysts believe that if commercial banks pass on the full benefits of the reference rate cut to consumers, it could stimulate borrowing and spur economic activity in key sectors such as manufacturing, agriculture, and services.
However, some financial experts caution that the extent to which individual banks lower their rates may vary, depending on internal cost structures, risk profiles of borrowers, and prevailing market dynamics.
As the financial sector responds to the latest benchmark revision, borrowers are advised to engage their lenders to understand how the new GRR affects their current loan obligations or potential credit arrangements.
