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BANKS SLASH PRIME LENDING RATE BY 1%

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MBABANE – The banking and lending institutions have effectively reduced the interest rates they can charge on loans after the central bank cut the repo rate from 6.50 to 5.50 per cent last Friday.

As it normally happens, when the Central Bank  of Eswatini (CBE) cuts the repo rate, which is the rate at which interest is paid by commercial banks when they borrow money from  it, the banks also cut the interest rates they charge the general public. In reaction to the cut by CBE, most of the country’s banks released revised rates yesterday and the reduction in the prime lending rate reflected a per cent decrease. The figures for this rate published by Nedbank, First National Bank, Swaziland Building Society and EswatiniBank are now at nine per cent.

“A reduction in the interest rate charged on loans means borrowers pay a little less than before. Such cash savings can then be used to expand business operations,” said an expert.
Reduction in the lending rates makes borrowing cheaper, and encourages entrepreneurs to start or expand their businesses by increasing production, which requires more inputs, such as workers and the hiring of equipment.

The lending rate will not only benefit new borrowers, but is also for those borrowers with floating interest rate contracts. Interest rates change with the change in the repo rate, reducing borrowers’ expenditure in debt servicing.According to the statement from most of the banks, rates on deposits in excess of E500 000 are negotiable. Meanwhile, the Central Bank, together with the Monetary Policy Consultative Committee (MPCC) decided to reduce the repo rate by 100 basis points to 5.5 per cent after considering global, regional and domestic economic developments and especially the impact of the coronavirus.

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