Banks submit proposal for NBE to freeze interest rates

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NBE (Photo: Anteneh Aklilu)

As per the recommendation of the National Bank of Ethiopia (NBE) to respond for the effect of COVID 19 banks are submitting their proposal for the central bank, Capital learned.
NBE proposed for banks to come up with their own initiative to mitigate the effect on their clients mainly for those who are highly affected because of the outbreak of the coronavirus.
The effect of the virus in the country is growing in the past few days after the country expands its laboratory test capacity. However the economic effect of the virus is started to be observed in Ethiopia since the outbreak was reported on March 13.
According to sources early this week NBE requested banks to come up with their responses until Friday May 8.
Based on that banks have submitted their proposal on how to contribute to the mitigation strategy for their clients.
Currently banks have rescheduled and rearranged their loan portfolio. Few weeks ago the central bank has waived its strong rules, mainly for loans, to support banks actions to solve challenges in the economy.
Since then almost all banks rescheduled the loan settlement and postpone periods. A bank president that Capital asked about the situation stated that banks rescheduled loans almost for every customer who demands that since NBE supported the idea.
Based on the new initiative that banks taking as per the recommendation of NBE they are also freezing interests for businesses that are mainly affected by the global pandemic.
One of the private banks’ president, who demands anonymity told Capital that his bank has decided to cut interest rates for sectors like hospitality and tourism for three months.
He said that relatively his bank is young and has limited capacity compared with oldest private banks, to freeze interest for months will cost his bank millions of birr.
It shows that how much economically affected companies get relief on the lift of interests.
At the same time Dereje Zebene, President of Zemen Bank, disclosed of Friday that his bank has lifted interest rates from 0.5 percent to 3 percent for sectors in the hotel, tourism and manufacturing.
The interest cut for the stated industries will remain for two months until June 30.
He reminded that his bank freeze interest rates for horticulture industry for three months until the end of the financial year that will be closed June 30.
Capital learned that other banks has also taken similar measures and disclosed for NBE.
Recently the Addis Ababa Hotel Owners Association disclosed that because of the pandemic the hospitality industry is losing USD 35 million every month and majority of them are linked with bank loans.
Recently Capital reported that the private sector is looking for banks to cut the interest rate on some percentage besides rescheduling the loan settlement period.
This move is appreciated by the private sector particularly by the manufacturing industry actors. They said that the situation has indirectly forced their activity besides direct effects related with the importation of raw material since some of the resource centers globally are closed.
“Our business is not as usual because of shifting of consumers to basic commodities and suspension of some economic activities,” one of the manufacturing industry operators told Capital.
“We were looking some measures besides loan reschedule the current measures shall support us to continue to cover at least wages” other industrialist engaged on heavy industry said.
Currently the central bank has established a vehicle for banks to access temporarily liquidity with 13 percent payment.
Banker stated that the interest rate by any measurement is very high.