Banks Slow to Reduce Lending Rates Despite BoG Policy Cuts – Economist
An economist at Aston University, Doctor Sajid Chaudry, has criticised commercial banks for what he describes as their slow response to reductions in the Bank of Ghana’s policy rate, arguing that high lending rates continue to restrict access to affordable credit for businesses.
Speaking at the Institute of Economic Affairs Economic Policy Forum, Dr. Chaudry said many banks often delay adjusting lending rates downward even after the central bank lowers its benchmark rate.
According to him, banks also tend to keep deposit rates low, resulting in consistently high net interest margins and strong profits for financial institutions.
“The central bank can use some kind of regulatory measures to persuade banks to really translate those monetary policy rate cuts into lending rates,” he stated.
He explained that while banks quickly react when policy rates increase, they are often reluctant to reduce lending rates when policy rates fall.
Dr. Chaudry suggested that the Bank of Ghana and other stakeholders may need to play a stronger oversight role to ensure that the benefits of monetary policy easing are passed on to businesses and consumers through lower borrowing costs.
He, however, acknowledged the limitations of direct intervention in a free market economy, noting that banks ultimately make independent pricing decisions.
His comments come at a time when businesses continue to raise concerns over the high cost of borrowing, with many arguing that expensive credit remains a major challenge to growth and expansion in Ghana’s private sector.
