Thursday, January 28, 2021
  • About Us
  • ImagiNATION
  • Adverts
  • Rate Card
  • Contact Us
The Nation Online
  • Home
  • News
  • Politics
  • Business
  • Entertainment
  • Life & Style
    • Every Woman
      • Soul
      • Family
    • Religion
    • Feature
  • Society
  • Opinion
  • Sports
  • Chichewa
  • Enation
No Result
View All Result
  • Home
  • News
  • Politics
  • Business
  • Entertainment
  • Life & Style
    • Every Woman
      • Soul
      • Family
    • Religion
    • Feature
  • Society
  • Opinion
  • Sports
  • Chichewa
  • Enation
No Result
View All Result
No Result
View All Result
Home Business Business News

Banks fighting for survival

by Johnny Kasalika
08/08/2012
in Business News
3 min read
0
Share on FacebookShare on TwitterShare on WhatsAppShare on LinkedinLinkedinShare via Email

avenue | The Nation OnlineCommercial banks currently reeling under the critical shortage of the kwacha in the country, are in a stiff competition to lure customers with different awards to open bank accounts. Financial market analysts have described this competition craze as a desperate attempt by the banks to avert liquidity shortages in the sector.

RelatedHeadlines

Report outlines tourism sector key constraints

More growers shun tobacco, says Tama

Rudevit intensifies capital mobilisation drive

A money market analyst Chikavu Nyirenda of Alliance Capital Limited said in an interview yesterday that at the moment it is clear that banks desperately want to patch-up for liquidity gaps in their balance sheets.

“The extent of desperation can be seen in massive promotional activities they are involved in, with some banks perching megaphones on event vehicles that are going around townships to woo people to open accounts with them and win fabulous prizes,” he said.

Nyirenda said the media is also awash with advertisements of different sizes, asking people to embrace the saving culture to win electronic equipment and even trips to China.

Excess borrowing

His observation resonates well with information from the banking community which show that most of them are borrowing heavily from the Reserve Bank of Malawi through the non-collaterised discount window to keep capital flowing to the banks.

The excessive demand for capital has soared to the extent that RBM Governor Charles Chuka has hinted that the non-collaterised discount window will attract a charge of four percentage points above the borrowing bank’s prime lending rates and that additional charges may be imposed if access is considered excessive.

This will automatically force banks to hike their lending rates again, spelling doom for businesses.

“The competition among banks have reached fever pitch proportions and, probably, reflecting the reality on the ground. The fact is that most banks do not have the liquidity,” said Nyirenda.

He said the banks are under pressure to maintain the Liquidity Reserve Requirement (LRR), a situation which he said is forcing them to heavily borrow from the central bank to meet LRR ceiling, currently at 15.5 percent.

LRR is a minimum reserve of bank customer deposits, normally in form of cash which is physically stored at the central bank.

Currently, for every K100 a person deposits with a local bank, K15.50 is locked idle at RBM, leaving the bank to lend out the remaining K84.50.

‘Banks soften up’

LRR, which local analysts argue is currently high in Malawi, is used as a monetary policy tool for influencing the country’s borrowing and interest rates by changing the amount of funds available for banks to lend out.

Nyirenda noted that most commercial banks have softened up their minimum balance and other charges to entice customers to open accounts with them.

“A lot of banks are doing away with minimum balance and also other charges and all they need is to ensure they have sufficient liquidity,” he added.

The Bankers Association of Malawi (Bam) chief executive officer Lyness Nkungula could not be reached for the banks’ position on the matter as she is reportedly to be on holiday.

The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) chief executive officer Chancellor Kaferapanjira cautioned on Monday that the present kwacha shortages may lead to massive bankruptcies in the private sector as they will be denied loans for recapitalisation.

Previous Post

Malawi strategises on narrowing trade gap

Next Post

Clinton’s loud whispers

Related Posts

Some of the stunning animals at Lengwe
Business News

Report outlines tourism sector key constraints

January 27, 2021
Tobacco growers grading their crop
Business News

More growers shun tobacco, says Tama

January 27, 2021
Nyirenda: We are extremely excited
Business News

Rudevit intensifies capital mobilisation drive

January 27, 2021
Next Post
The Nation Online Clinton’s loud whispers image 1

Clinton’s loud whispers

Trending Stories

  • Pledged to review Cabinet: Chakwera

    Donors up game in Covid-19 fight

    0 shares
    Share 0 Tweet 0
  • New mashup draws mixed reactions

    0 shares
    Share 0 Tweet 0
  • SA returnees in forced quarantine

    0 shares
    Share 0 Tweet 0
  • Budget off rails

    0 shares
    Share 0 Tweet 0
  • Minibus drivers, conductors stage another protest

    0 shares
    Share 0 Tweet 0

Opinions and Columns

My Turn

When schools become inaccessible, a glimmer of hope in a coding boot-camp

January 27, 2021
My Turn

Behaviour change key in Covid-19 fight

January 25, 2021
Emily Mkamanga

Citizens power brings change

January 24, 2021
Search Within

The rural farmer needs to take centre stage

January 24, 2021
  • Values
  • Our Philosophy
  • Editorial policy
  • Advertising Policy
  • Code of Conduct
  • Plagiarism disclaimer
  • Disclaimer
  • Privacy Policy
  • Terms of use

© 2021 Nation Publications Limited. All Rights Reserved.

No Result
View All Result
  • Home
  • News
  • Politics
  • Business
  • Entertainment
  • Life & Style
    • Every Woman
      • Soul
      • Family
    • Religion
    • Feature
  • Society
  • Opinion
  • Sports
  • Chichewa
  • Enation

© 2020 Nation Publications Limited. All Rights Reserved.

This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.