Finance Trust Bank drops Prime Lending Rate to 21% for new loans Finance Trust Bank comes third after Equity Bank Uganda and Stanbic Bank Uganda reduced their PLR

Finance Trust Bank (FTB) has become the 3^rd commercial bank to reduce its Prime Lending Rate, revising it to a significant 21 percent from 22 percent per annum up effective 7th September 2020.

According to FTB, this rate shall apply to new loans only.

In a public notice, the bank noted; ‘’This is to inform you that effective 7th September 2020, our Prime Lending Rate will reduce to 21% p.a from 22% per annum. This Rate shall apply to new loans’’.

FTB becomes the latest commercial bank to reduce Lending rates following the call by the Central Bank to commercial banks to offer concessions to existing clients, to support clients in line with BOU COVID-19 credit relief guidelines and competition for clients.

First was Stanbic Bank which announced reduction of the Lending Rate to record low 16 percent, 2.84 percentage points below the 18.84 percent industry rate published by Bank of Uganda for May 2020.

In July, Equity Bank has also reduced its rate from 22% to 20.5% effective 1st September 2020.

So far this year, Bank of Uganda has reduced its Central Bank Rate from 9 percent in January 2020, to 8 percent in April and a further decline to record low 7 percent in June since it was introduced in July 2011 as a monetary tool.

The Central Bank in June noted that it expected commercial banks to reduce lending rates in line with BOU COVID-19 credit relief guidelines and competition for clients.

“The expected net easing of average loans and prime borrowers is based on; further reduction in the CBR, the desire for commercial banks to offer concessions to existing clients, need to support clients in line with BOU COVID-19 credit relief guidelines and competition for clients. On the other hand, the main reasons for the tightening of riskier loans were on account of uncertainty and the increased likelihood of default in a constrained environment,” noted the Central Bank.

“As regards to non-price terms and conditions, banks expect to keep noninterest rate charges and maturity period largely unchanged with a bias towards easing for noninterest rate charges and tightening for maturity period. On the other hand, majority of banks expect to tighten the size of the loan and collateral requirements. The reasons cited for the anticipated net tightening of majority of the non-price terms and conditions include; uncertainty in the business environment that makes it difficult to predict future cash flows and the need to mitigate credit default risk in line with the current constrained economic environment,” the Central Bank further reported.