ACCRA,Leaders from Ghana’s banking have stressed that reductions in the central bank’s Monetary Policy Rate will not necessarily be reflected in the current high lending rates of banks until other underlying factors influencing the rates are also addressed.

Responding to questions raised during a panel discussion at the Ghana Economic Forum here Monday on Maintaining a stable macro-economy for sustained and inclusive development, the Managing Director of Zenith Bank Ghana Limited, Henry Oroh, said interest rates in the banking sector were still high mainly because the cost of credit for banks remained high.

He said although the Bank of Ghana had significantly reduced its Monetary Policy Rate, which determined commercial banks’ lending rates, it had not reflected in the sector yet because funds were still expensive, with cost of deposits still at around 20 per cent.

Oroh, who is also the bank’s chief executive officer, noted that a reflection of the reduced MPR would not happen if owners of funds continued to ask for higher returns on their deposits. Banks and owners of funds had to align with the government’s agenda to bring cost of funds down and ensure lower interest rates, he added.

Patience Akyianu, the Managing Director of Barclays Bank Ghana Limited, the lead sponsor of the Ghana Economic Forum, also noted that the high non-performing loans (NPL) ratio in the sector at about 20 per cent, was a contributing factor to the prevailing high interest rates in spite of the reduction in the MPR.

The cost of doing business in Ghana was also high, which were all factored into the pricing, she added.

She said the lack of a proper rating system to separate good companies from weak ones compelled banks to generalise in the decisions on who to lend to and at what rates, in light of the high NPL ratio.

Until we sustain the macro-economic gains we have made and find a way to rate companies to separate good ones from bad ones, till our NPLs reduce, we will not see the MPR rate translate into interest rates, she stated.

She added that companies also had a responsibility to improve their governance structures and their efficiency.

The panel also discussed other factors in maintaining a stable macro-economy. Dr Osei Assibey, a senior lecturer at the Department of Economics of the University of Ghana, who was also on the panel, noted that although macro-economic stability was important, it was not enough in itself.

There was also the need for increased structural transformation and productivity to go alongside the macro-economic gains.