Banks decide to cut loan interest rates this month |05 February 2010

He did so after a meeting attended by the heads of all six banks in the country, Finance Minister Danny Faure, Central Bank governor Pierre Laporte and principal secretary for finance Ahmed Afif.

Mr Faure described the meeting in Barclays Bank’s conference room as “very constructive” and said there was consensus among the six banks that they will bring down their interest rates.

“We see that as a very important step in the way forward,” he said, adding that the government is no longer issuing treasury bills.

“We have presented our medium-term economic plan. They understand and they know exactly the direction the government is following and we are happy with that.

“They know that the situation is no longer the same and there are new dynamics in the Seychelles economy. The banks are prepared to continue to play their role to inject a new stimulus so we can improve the economy.”

Mr Laporte said the Central Bank followed the meeting with interest, noting that it was important as the government is a shareholder in two main banks, whose managers expressed their views on interest rates.

“We feel the conditions exist for interest rates to come down further. We hope today’s meeting is the beginning of a new phase of interest reductions for the benefit of the business community and Seychellois at large,” he said.

Mr Sidambaram said since the market started stabilising in 2009, the banks have reduced interest rates three or four times.

He said since neither the government nor the Central Bank is fixing the rates, they will keep changing all the time. He also said the meeting was “constructive and the issue of interest rates was high on the agenda, as it has been at other meetings for a long time”.

He said the delay in announcing interest rate cuts was due to the fact that the banks needed to analyse the situation.
“Now money is shifting from treasury bills to the banking sector to be lent to the private sector,” Mr Sidambaram said, adding that the banks need to “ascertain the credit quality of the customers”.

“We will still continue to have meetings with the authorities, specifically with the Central Bank, to see how we can best deal with the situation because there is a huge amount of money which is now available for lending compared to what was in treasury bills before,” he said.

“We cannot just take all the money and overnight lend it to customers. That would be reckless lending, which has caused difficulties all over the world and we do not want that to happen in Seychelles.”

Yesterday’s meeting comes only a few days after President James Michel urged commercial banks to review their interest rates on loans to help “oxygenate” the economy and allow for more development and business opportunities.
 
President Michel said this during this year’s first En Moman avek Prezidan programme, which was aired on SBC TV at the weekend. 

“Today the government is managing the economy in a transparent manner and is controlling its expenses while the Central Bank is carrying out its role as monetary regulator, but other partners like the commercial banks should also play their part and improve their performance,” he said.

Mr Michel said across the world today, interest rates on loans are far lower than in Seychelles, where prime rates are 12%.
This is not acceptable, he said; with the present economic stability, interest on loans should have a prime rate of around 7% to 8%.

He called on the Central Bank to talk to the commercial banks and ensure they address the issue as a matter of urgency.