Commercial banks to implement new formula for base rate from March

Commercial banks are expected to start implementing a new formula for base rate calculation possibly from next month.

JOYBUSINESS is learning this would happen after the banks finalises work a report presented by a committee established to examine the framework for base rate calculation in the country. 

According to the Bank of Ghana (BoG), unlike existing framework which is largely driven by bank-specific indicators like inflation rate, policy rate, treasury bill rate and the banks own cost of securing credit.

The Central Bank says the new methodology is forward-looking and it is anchored on market-based indicators and better reflects prevailing market conditions.

Some industry experts are hopeful it will help address the problem of high-interest rate regime in the country as well as bring some transparency in the determination of the base rate of banks.

Currently, customers are likely to pay about 35 percent as interest on loans. Most businesses have questioned the factors that the commercial banks use to determining interest rates or base rate. 

However, there appear to be mixed reactions to this move; while some banking chiefs welcome the initiative, other players in the industry believe that it might achieve the desired results. 

Managing Director of Barclays Bank, Patience Akyianu tells JOYBUSINESS they have been part of the process since the committee was established and the bank is committed to implementing the formula when the committee completes its work with the necessary recommendations.

Managing Director of Ecobank Ghana, Dan Sackey also says when the formula is finally implemented, it will bring some transparency into the determination of base rates.

However, co-founder of UT Bank tells JOYBUSINESS although it is good for market he does not think that the expected results of driving down interest rate or cost of credit will be achieved.    

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