CRDB Bank is focused to boost lending to the private sector after improved liquidity, its Managing Director, Charles Kimei has said.
“When opening Dodoma branch late last year our deposits were 4.0tri/- but today have reached 4.4tri/-. This means we [CRDB] managed to accumulate 400bn/- in three months…this shows liquidity in the market has improved,” Dr Kimei said.
He said further that banks returning lending private sector was just a matter of time since central bank has slashed substantially interest rates on government securities. “We will see commercial banks returning lending to the private sector since bonds are not that attractive any more as interest rates are down,” he said.
In recent days BoT slashed government securities interest rates, to some instrument, to single digit while too much money are chasing limited goods. For instance, last week Treasury bills auction the government wanted to raise 170bn/- but bids worth 265.28bn/- were received with an over subscription of 96.28bn/-.
The bank accepted same amount 170bn/- that was put on offer. The auction was dominated by commercial banks accounting for 92.71 per cent of the total bids followed by insurance companies with 4.68 per cent, pension funds with 1.12 per cent and other investors with 1.49 per cent. “The overall weighed average yield decreased to 4.84per cent from 5.19 per cent registered in the previous auction,” BoT said in a statement.
The sector in the last two and half years had reduced to a great extent lending to the private sector to reach all time low when it was growing by 1.5 per cent. And once the situation started to improve at one hand commercial banks hesitated to lend top the private sector as defaulting rate was high and preferred government securities.
On other hand businesspersons avoid borrowing as businesses were doing badly as purchasing power dropped to historical lowest level. Banks were struggling to raise deposits due to lower saving cultures after the government withdrew its deposits from commercial banks and opened a single treasury account at Bank of Tanzania (BoT).