ANALYSTS ATTRIBUTE DECLINING RATES TO EXCESS LIQUIDITY

Analysts have attributed the current declining interest rates to –depressed loan demand that resulted in financial institutions having excess accumulation of cash.
It has been noted that commercial banks are cutting their normal lending rates to around 37% from an average of 42%–as those of treasury bills are noticeably going down as well.
Meanwhile, one of the financial market analysts Chikavu Nyirenda said this simply means there is much money in the system –attributable to the recent high interest rates which may have been barring people from borrowing.
“Yes we have seen National and Standard banks adjusting downwards normal lending rates, and this is hopefully going to extend to other banks as well.” Nyirenda said.
Though expressing some reservations over causatives of the reduction, Nyirenda has described the development as welcome saying will bring positive impacts on local economy if it is to be maintained.
“The issue should be on analyzing what is causing this improvement?
“Because to mu analysis this is being influenced by banks eagerness to make money on existing cash or these financial institutions have excess cash due to people’s lack inability to borrow considering that these rates have been not considerate.
“So it could be possible that these banks have excess liquidity so much that they are desperate to release in a form that will be at least profitable.” Nyirenda said.
Mean while, Nyirenda has said the profitability of the situation on the local economy will depend on its sustainability -as he says short term twists affects business planning.
So far, treasury bills have also registered a significant drop in interest rates as follows;-
The 91 days maturity Treasury bill at 15.68% from 16.46%, the 182rate decreased to 17.15% from 18.00% and the 364days rate to 19.19% from 20.15%.