A customer in a banking hall in Kampala recently. According to the Interest Rate Expectations for the 2020/21 financial year second quarter, majority of the banks (77 per cent) expect their lending rates to remain largely unchanged at 23 per cent or drop down. PHOTO/FILE
A study by Bank of Uganda has indicated that banks tightened credit standards for large, small and medium enterprises and household loans from July.
The trend, according the survey, will tighten further in the quarter to December 2020 with a projected low access to credit.
Lending rates have already increased despite a low Central Bank Rate, which currently stands at 7 per cent. “In the quarter to December, banks are expect to continue tightening overall credit standards, although at a slower pace compared to the level indicated in the previous quarter,” the Central Bank survey, reads in part.
The survey also noted that other sectors such as real estate, trade, business services, transport and communication, personal and household, manufacturing, mining and quarry and agriculture will experience tightening in the quarter to December.
However, credit standards for other sectors such as electricity and water will ease.
Credit
standards are expected to tighten due to subdued economic activities
that have led to low demand and created a high risk of default.
Banks have also been cautious while lending to high risk sectors, some of which have been weakened by Covid-19.
The Central Bank noted sectors such as education, tourism, arts and entertainment, have become high risk thus banks have tended to tighten credit standards for such sectors.
The report also notes that, according to the Interest Rate Expectations for the 2020/21 financial year second quarter, majority of the banks (77 per cent) expect their lending rates to remain largely unchanged at 23 per cent or drop down.
However, the report also notes that no bank expects interest rates to increase over the next quarter to December 2020.
moketch@ug.nationmedia.com
No comments :
Post a Comment