Interest on loans continue to decline

The interest charged by banks and other lending financial institutions on loans and advances to individuals and corporate clients, has consistently declined over the past five months.

According to data from the Central Bank, which covered 31 banks, the industry average lending rate as at May 31, 2017 was 26.6 percent, a marginal drop of 0.2 percent over the April rate of 26.8 percent.

Also, the average deposit rate as at May 31 was 11.2 percent, a marginal decrease of 0.1percent, compared to 11.3 percent as at April 30.

In January, the average deposit rate was 11.9 percent, giving a year-to-date decrease of 0.7 percent.

The data shows that as at end of January 2017, the industry average base rate was 27.6 per cent, giving a year-to-date drop of 1 percent.

The Bank of Ghana explained, in a statement, that the APR is the true interest rate banks and non-bank financial institutions charge the public on loans and advances.

The Central Bank, on a monthly basis, provides data on the industry’s interest charged on loans and advances and interest paid on deposits, known as the Annual Percentage Rates (APR) and Average Interest (AI) respectively.

“It reflects the true cost of borrowing and includes charges and commissions levied by banks. Average interest paid on deposits is the average interest paid by banks on deposits over the period. Base rate reflects the minimum interest rate that can be charged on loans and advances,” the statement added.

The statement noted that the publication of these rates is to promote transparency in the pricing and provision of banking services.

“Bank of Ghana aims to promote accountability of its decision making and build understanding of the monetary policy formulation process among stakeholders through the publication of these documents.”