Loan suspensions have started at certain banks, especially for brand-new clients. This comes after the Bank of Ghana raised its policy rate to 24.5%.
According to Joy Business, a few of the foreign banks present in the nation have emailed their Relationship Managers and Officers to halt lending to new clients. This will enable them to take on less risk when making loans to new clients.
The amount of non-performing loans held by banks typically increases when interest rates rise, which is why some financial intermediaries pause or reduce lending, especially to new clients. This will aid in containing the amount of non-performing loans.
As a result, even while the demand for loanable funds increases during economic downturns, the supply is still limited. Existing and credit-worthy customers will still be able to get loans, albeit at a higher interest rate.
Last week, the Bank of Ghana raised its policy rate, which determines the interest rate at which it lends to commercial banks, by 250 basis points to 24.5%. It blamed the weakening of the cedi and rising inflation for the hike in its basic lending rate.
“Inflation is still high, and the upside risks outweigh the downside dangers. Despite predictions that monthly inflation will continue to decline, there are upside risks, mostly due to currency depreciation pass-through effects, a recent increase in utility rates, and rising inflation expectations. The Committee is still dedicated to re-anchoring inflation expectations and moving back toward a path of deflation,”
The most recent credit conditions survey, which was performed in August 2022, revealed an overall net tightening of the credit stance by the commercial banks toward corporates and households, according to the Bank of Ghana’s most recent Banking Sector Report. The average lending rates were steadily rising as a result.
Despite this, fresh advances rose by 56.1% annually to $33.8 billion in August 2022, compared to a 4.9% growth in the previous year.