BoN and banks to tackle rate spread

THE high interest rate commercial banks charge their clients will be discussed next week at a meeting between the Bank of Namibia (BoN) and the Bankers’ Association of Namibia (BAN).

BoN Corporate Communications Head Helene Badenhorst yesterday confirmed that the big spread between the central bank’s repo rate and local banks’ prime lending rate, long a source of agitation to BoN Governor Tom Alweendo, will be on the agenda at the quarterly meeting next Thursday.’The purpose of this meeting is to discuss operational issues and any other issues that might be of importance. It is therefore a normal business meeting. The rate spread will be discussed among other agenda items,’ Badenhorst said.Except for Standard Bank Namibia, commercial banks currently borrow money at 7,5 per cent, to lend it to clients at 12,25 per cent. The interest rate spread therefore is 4,75 per cent.Standard Bank Namibia used to entertain the same spread, but broke away from the norm on Friday when it announced a drop of one percentage point in its prime lending and home loan base rates – half a percentage point more than the latest decrease in the repo. This shrinks the bank’s rate spread to 4,25 per cent.Their new rate of 11,75 per cent became effective yesterday.BoN Governor Alweendo last week told Bottomline that the huge interest rate gap in Namibia is not justified when compared to similar economies.Meanwhile, the South African Reserve Bank (SARB) and leading commercial banks have agreed to set up a technical committee to look into their rate spread after SARB Governor Tito Mboweni complained about the big gap.The difference between the SARB’s repo rate and the prime lending rate in SA currently stands at 3,5 per cent – 1,25 percentage points less than the spread in Namibia.jo-mare@namibian.com.na