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Here is why commercial banks in Ghana charge high interest rates

Magdalene Teiko Larnyoh

The Managing Director of Premium Bank said banks do not only use Treasury Bills in calculating their interest rate.

The Managing Director of Premium Bank Kwasi Tumi in an interview with Accra-based Citi FM said banks have a ways of calculating their cost of funding.

“Treasury bills alone are not the factor. Banks have a way of computing their cost of funding and there are various parameters that go into that cost of funding, it is not only Treasury bills” Managing Director of Premium Bank, Kwasi Tumi said.

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He defended the high interest rates despite the declining Treasury Bills. He said this meant that other factors contributed to the high interest rate in the country.

“It is a market and the market determines why rates drop or why rates go up. So if Treasury Bills are dropping and bank rates are not dropping then there is something in the markets that is holding those rates up. So if those other factors are not dropping, then obviously they cannot just drop.”

He emphasised that T-Bills only account for a slight percentage of the indicators.

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Treasury Bills have been dropping significantly. The 91-day bill, for example, is now at 12 percent after starting 2016 at 22 percent.

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But this has not reflected in the interest rates of commercial banks.

However, Tumi was hopeful the rates will soon drop marginally.

“That is the fact but over time, one would expect that the rates will come down.”

Magdalene Teiko Larnyoh Magdalene Teiko Larnyoh A feminist at heart and a lover of art. She loves to write on business, politics and health.

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