Commercial Banks have started exploring more lending options to businesses and purchasing other assets class on the market, as well as high-yielding instruments.

Lending to enterprises have been gradual, as most of the banks explore avenues to secure prudent returns on their funds.

The development has been influenced by the significant reduction in the Treasury Bills rate over the past two months, which has dropped more than 20 per cent from the beginning of the year to about 15 per cent in March.

The President of the Ghana Association of Banks and Chief Executive of Stanbic Bank Ghana, Kwamina Asomaning disclosed this on PM EXPRESS BUSINESS EDITION on March 20, 2025, with host George Wiafe.

He noted that the banks are making this rational move as a response to current market developments.

He explained that the banks are taking this decision to make prudent returns on their investments.

Treasury Bills reduction and market impact

Mr. Asomaning noted that the reduction in the Treasury Bills rate by government is a good move and should be encouraged by any player in the banking industry, “looking at the fact that the Treasury Bills Rate was too high”.

He, however explained that the development has brought some sudden pressure on the cedi as investors strategize to get some good returns on their investments.

“This is because what some of these investors are getting now has been impacted by the current inflation rate on the market”, he said.

He stated that some additional measures should be implemented to stabilize the situation, with commercial banks committed to working closely with the Bank of Ghana.

Treasury Bills rate reduction debate

Mr. Aasomaning recommended that the pace of Treasury Bills rate reduction must be managed well to lessen the expected shocks on the market and ensure that, the decline is line with other macro indicators like inflation rate and Monetary Policy Rate.
He, however advised investors who are actively monitoring the Treasury Bills rate reduction to be guided by expected inflation in the coming months, rather than historical data.

“The Finance Minister Dr Ato Forson in the 2025 Budget is projecting that the inflation rate will hit 11 per cent by the end of the year and that should indicate their commitment to reducing the inflation rate further in the coming months”, Mr Asomaning said.

High interest rate dynamics

Mr. Asomaning rejected arguments that commercial banks have been benefiting from the high interest rates. “We are not happy when interest rates are high, because of its impact on the ability of businesses to pay back on time. That is why some banks reduce lending, because of this challenge”, he said.

On High Non-Performing Loans, he described the situation as worrying.

“We have taken some measures, to try and correct the situation, with the necessary support coming from the Bank of Ghana”, he assured.

Data from the Ghana Bank ending December 2024 puts Non-Performance Loans at around 21. 8 percent.

The development has impacted the ability of banks to lend, as most of them are looking to improve their financial position. “We should not forget about the external environment and how it has impacted on the ability of businesses to pay back their loans on time”.