Stanbic Bank Uganda is cutting its prime lending rate from 18% to 17.5% for loans in Uganda shillings, in response to October’s decision by Bank of Uganda to reduce the central bank rate by 0.5% to 9.5%.
The change will apply to both existing and new borrowing customers. For existing customers, this implies that the deduction is automatically applied to their loan.
This means Stanbic, Uganda’s largest commercial bank by assets, has the lowest prime lending rate of all commercial banks active in Uganda’s credit market.
“We are firm believers in maintaining transparency in our pricing to our clients, and for this reason we have consistently matched the movements of the CBR each time the Central Bank has made an adjustment,” Sam Mwogeza, Stanbic’s chief financial officer said while announcing the cut on Thursday.
The bank has now reduced its PLR eight times since the easing of the monetary policy was started 18 months ago.”
Commercial bank lending rates peaked at a four-year high of 28% in the first quarter of 2016, informing the central bank’s decision to ease monetary policy in a bid to boost economic activity through private sector credit.
But the policy has so far yielded mixed results. Inflation has come under control, but demand for credit has remained sluggish.
In October, the central bank’s monetary policy statement noted that growth in private sector credit has remained sluggish. In cutting its policy rate – which determines the cost of short-term financing to banks – the central bank was hoping that commercial banks would follow its lead to lower their lending rates.
In line with Bank of Uganda’s regulations that require banks to give one month’s notice before any upward or downward adjustment of interest rates, Stanbic banks new prime lending rate of 17.5% for new and existing loans will be applicable from 1 January 2018.