T- Bills reduction: Banks explore more lending options and purchasing high yielding assets

Commercial Banks have started exploring more lending options to businesses and purchase of 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 Treasury Bills rate over the past two months, which has dropped more than 20 percent from the beginning of the year to about 15 percent in March.

The President of Ghana Association of Banks and Chief Executive of Stanbic Bank Ghana, Kwamina Asomaning disclosed on March 20, 2025.

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 revealed that the significant drop-in inflation rate has brought a sudden pressure on the cedi.

“This is because the return that the investors are getting now is not commensurate with expected inflation rate”, he explained.

He pointed out that the situation will influence the dealings of businesses and banks demanding for forex.

“All these developments will bring some pressure on the Ghana Cedi in the coming weeks”, he warned.

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 inflation rate will hit 11 percent by the end of year and that should indicate their commitment to reduce inflation rate further in the coming months”, Mr. Asomaning said.

High interest rates 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 of 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”.