Money borrowed by commercial banks from Bank of Uganda (BoU) to fund shortages caused by Covid-19, increased in September by Shs30b, according to details from the Central Bank.
Details contained in the Bank of Uganda State of Economy Report for September, indicate that the Central Bank has so far lent out Shs90b to shore up commercial bank operations that are facing funding challenges.
However, the Central Bank does not offer details on which banks sought the funding or how much was lent out to the respective banks.
Last month, in its Financial Stability Review for the period ended June, the Central Bank said three banks, which still it did not name, sought funding of up to Shs60b from the Covid-19 Exceptional Liquidity Assistance Facility and the Lombard Window.
The two facilities have since April been used by Bank of Uganda to provide emergency funding and support banking institutions to shake off Covid-19-related effects.
In April the Central Bank established emergency liquidity assistance measures in which it sought to shore up capital and funding gaps in some supervised financial institutions whose revenues had been affected by Covid-19.
Commercial Bank interest rates
However, the report noted that during the period to July commercial bank lending rates for shilling-dominated loans rose by a 1.6 per cent rate from 19.7 per cent in June to 20.9 per cent in July. In April it stood at 19.7 per cent.
The increase, the report noted, was partly due to unsecured lending to individuals, households and lending to the riskier sec-tors such as agriculture.
Lending rates on foreign currency-denominated loans on the other hand declined to 5 per cent from 6.5 per cent over the same time period.
The Central Bank also noted that although it has steadily reduced the Central Bank Rate, the pricing behaviour of some banks have not changed with several consistently pricing below or above the industry rate.
“The majority of banks with higher lending rates, however, tend to have higher non-performing loans, a small market share and a large number of micro borrowers,” the report said, noting that a recent bank lending survey had found that default rates on loans to both enterprises and households is likely to increase in the quarter to September 2020.
Money borrowed by commercial banks from Bank of Uganda (BoU) to fund shortages caused by Covid-19, increased in September by Shs30b, according to details from the Central Bank.
Details contained in the Bank of Uganda State of Economy Report for September, indicate that the Central Bank has so far lent out Shs90b to shore up commercial bank operations that are facing funding challenges.
However, the Central Bank does not offer details on which banks sought the funding or how much was lent out to the respective banks.
Last month, in its Financial Stability Review for the period ended June, the Central Bank said three banks, which still it did not name, sought funding of up to Shs60b from the Covid-19 Exceptional Liquidity Assistance Facility and the Lombard Window.
The two facilities have since April been used by Bank of Uganda to provide emergency funding and support banking institutions to shake off Covid-19-related effects.
In April the Central Bank established emergency liquidity assistance measures in which it sought to shore up capital and funding gaps in some supervised financial institutions whose revenues had been affected by Covid-19.
Commercial Bank interest rates
However, the report noted that during the period to July commercial bank lending rates for shilling-dominated loans rose by a 1.6 per cent rate from 19.7 per cent in June to 20.9 per cent in July. In April it stood at 19.7 per cent.
The increase, the report noted, was partly due to unsecured lending to individuals, households and lending to the riskier sec-tors such as agriculture.
Lending rates on foreign currency-denominated loans on the other hand declined to 5 per cent from 6.5 per cent over the same time period.
The Central Bank also noted that although it has steadily reduced the Central Bank Rate, the pricing behaviour of some banks have not changed with several consistently pricing below or above the industry rate.
“The majority of banks with higher lending rates, however, tend to have higher non-performing loans, a small market share and a large number of micro borrowers,” the report said, noting that a recent bank lending survey had found that default rates on loans to both enterprises and households is likely to increase in the quarter to September 2020.