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Business News of Tuesday, 29 September 2015

Source: citifmonline

Interest rates to shoot up as BoG hikes policy rate

As the debate on whether or not commercial banks should increase their base rates following the Bank of Ghana's (BoG) hiking of its policy rate, Managing Director of HFC bank, Robert Le-Hunte, has told Citi Business News it will be difficult for banks not to increase their interest rates.

According to Robert Le-Hunte, the hiking of the Bank of Ghana’s policy rate by 100 basis points from 24% to 25% is a clear signal for the banks to raise their lending rates to remain profitable.

The monetary rate is the rate at which the central bank lends to commercial banks and is also used by banks to calculate their base rates.

Industry players in the banking sector had warned that though the hike may tame inflation, banks will increase interest on loans as well as reduce access to credit.

Ghana has one of the highest interest rates in the world.

Interest on bank loans in the country on the average are currently between 25 and 35 percent.

However, pressure has been mounting on the financial sector, especially commercial banks, not to increase their interest rates weeks after the Bank of Ghana increased its monetary policy rate citing inflationary pressures and uncertainties within the foreign exchange market as the main reasons for the increment.

Speaking with Citi Business News on the sidelines of HFC Bank’s annual corporate social responsibility ceremony, Robert Le-Hunte was optimistic the lending rates will drop after a while.

‘There is a formula for which banks work out their minimum lending rate and that formula is handed over from the central bank so therefore when the BoG sends a signal to increase the rate it automatically raises’.

HFC Bank this year donated over 340,000 cedis to fourteen institutions as part of the bank’s corporate social responsibility contribution to society.

Some of the institutions that benefited are Ghana Blind Union, Ridge Hospital, and the Accident Centre of the Korle-Bu Teaching Hospital, Ghana Heart Foundation, Catholic Action for Street Children and Help Age Ghana, Bonwire Anglican Primary school among others.