Mar 2008 Financial News

Lending rate increases

Mar 04, 2008

Businesses and individual customers now have to pay more for TT dollar loans.

Commercial banks increased their prime lending rate from 11.75 per cent to 12.25 per cent.

The increases took effect on March 1 and yesterday.

RBTT Bank said the lending rate hike was as a result of prevailing market conditions.

Republic Bank, First Citizens and Scotiabank also upped their rates.

The adjustments followed rising headline inflation to ten per cent last month and the Central Bank's increase of the repo rate for commercial banks.

Unchanged for more than 17 months, the Central Bank adjusted the repo rate by 25 basis points from eight per cent to 8.25 per cent.

The repo rate is the overnight lending rate commercial banks adhere to when they borrow money from the Central Bank.

In addition, the Central Bank also increased the reserve requirement of commercial banks from 11 per cent to to 13 per cent.

These factors, led by the Central Bank's initiative to implement liquidity absorption measures to dampen the increase in money demand brought on by a booming economy, have led to the increased prime lending rate, said RBTT Group chief executive officer Suresh Sookoo.

The increases of the reserve requirement and the repo rate means that the cost of doing business for a bank also increased, Sookoo said.

Scotiabank's managing director Richard Young said in a telephone interview yesterday that the reserve requirement increase would absorb about $500 million in liquidity.

The Central Bank's moves to address inflation and the subsequent increase in the prime lending rate by commercial banks will also make it more expensive to borrow and therefore reduce consumption, Young added.


Source:
Curtis Rampersad
Daily Express
Tuesday, March 4th 2008

http://www.trinidadexpress.com/index.pl/article_business?id=161287410