Absa Bank has slashed its prime lending rate on shilling denominated credit as a way to stimulate economic activity within the private sector amidst the coronavirus pandemic.

In a notice to the public, the bank said its prime lending rate effective August 1, will be pegged at 16.5%.

“Effective Sunday, August 1, 2021, our UGX prime lending rates will reduce from 17.00% to 16.50%,” Absa said in the notice.

A prime lending rate is the interest rate that commercial banks charge their most creditworthy customers. This means that depending on the bank’s assessment of a borrower, you may pay more than 16.5%.

The benchmark lending rate or central bank rate serves as the basis for the prime rate, and prime serves as the starting point for most commercial bank interest rates.

On June 16, the Bank of Uganda monetary policy committee cut the benchmark lending rate by 0.5 basis points to 6.5% on due to contraction in private sector investment heightened by coronavirus induced uncertainties.

Overall, commercial banks’ shilling denominated lending rates edged downwards in April, decreasing to a weighted average of 18.10% from 18.76 % in March. This development was attributed to the continued accommodative monetary policy stance by the sector regulator.