The recent reduction in the Liquidity Reserve Requirement (LRR) from 15.5 percent to 7.5 percent has prompted two more commercial banks, National Bank of Malawi and FMB to revise downwards their base lending rates.
NBM announced last week that it has revised its lending rate to 32 percent from 39 percent while FMB on Thursday also slashed its base lending rate to 33 percent.
NBM and FMB decisions follow a similar gesture by Standard Bank Malawi Limited, which led in reducing its interest rate to 32 percent from 38 percent to accord customers an opportunity to obtain affordable loans for reinvestment.
RBM spokesperson MbaneNgwira on Thursday described the recent revision in bank lending rates following LRR cut as a positive development in the financial system.
He said RBM expected that banks would cut their rate spreads following their action to cut LRR-the mandatory deposit that banks make at RBM and is stored physically.
“The rationale is that LRR is a cost to banks and by reducing the LRR we have reduced the cost of funds to banks, which is a major component of the spread. This has already resulted in banks cutting their base rates hence lending rates,” Ngwira said.