Equity Bank Uganda revises prime lending rate downwards to 20.5%

Equity Bank Uganda has revised its prime lending rate (PLR) reducing it significantly from 22% to 20.5% with effect from September this year.

“We would like to inform our members and the general public that in light of the market conditions, we are glad to advise that our Ugandan shilling Prime lending rates will be revised from 22% to 20.5% effective 1st September 2020,” said the bank in a recent statement.

According to Equity Bank, the change in lending rates will apply to both existing and new loan facilities.

Equity becomes the second bank to cut the lending rate after Stanbic, early this month cuts its PLR to a record low of 16% effective August 1st.

Bank of Uganda (BoU) last month cut the Central Bank Rate (CBR) by 200 basis points to 7%, a moved aiming to cushion the economy and encourage lending to households and businesses that were battered by the effects of the Covid-19 lockdown.

Central Bank to commercial banks

The Central Bank, early this month in a letter by the Governor Emmanuel Tumusiime Mutebile to chief executive officers of commercial banks, copied to the Uganda Bankers Association,  urged the banks to lower their lending rates.

In the letter, Mutebile said he was disheartened that lending rates were not reducing, despite a couple of reductions to the benchmark Central Bank Rate (CBR) since 2016.

The CBR was slashed by 200 basis points to 7%, the lowest ever, between April and June, to counter the effects of the Coronavirus on the economy. However, the weighted average industry lending rates rose to 18.8% in May, from 17.7% in April, against BOU’s signal for a reduction.

The CBR is the benchmark rate at which financial institutions borrow from the central bank. When a bank is facing liquidity (cash) challenges, they borrow money from the central bank or from other banks, using the CBR as the benchmark rate.

The lockdown has adversely affected borrowers’ ability to meet their loan obligations with several commercial banks.