Fixed deposits interest rates slide, lending up

Commercial banks time deposit rates have decreased slightly by 0.3 percentage point while lending rates rose by 0.04 percentage point in October.

The Bank of Tanzania (BoT) says its latest monthly economic review report that average time deposits rate dropped to 8.69 per cent from 8.99 per cent registered in September.

“But (time deposits rate) remained higher than 8.52 per cent recorded in October 2012,” BoT says.

However, the overall lending rate increased slightly to an average of 15.88 per cent from 15.84 per cent registered in the preceding month, but was lower when compared to 16.45 per cent recorded last October.

Consequently, the spread between one-year time deposit rate and lending rate narrowed to 2.76 percentage points this October from 2.81 percentage points for the previous month.

The spread, however, in 2012 was 3.19 percentage points. But while fixed deposits rate dropped the Dar es Salaam Stock Exchange (DSE) domestic market capitalisation rose by almost 19 per cent in October.

The market cap rose from 4,308.64bn/- of September to 5,129.09bn/- in October meaning that on average a share price increased by 19 per cent in one month. This means an investor on fixed deposit for one month received a gain of 8.69 per cent in October, while a stock investor took home a yield of 19 per cent for every 100/- invested.

Money market analysts have it that the sliding of the fixed deposit rates discourages further depositors to put their savings at commercial banks as most would start looking at other money markets with high returns.

“This is a good trend as it will force banks to raise rates to woo deposits,” the analyst told ‘Daily News’. 

Of late some banks have come up with a number of promotions geared to increase deposits level, which is a core liability that once turned to assets could increase an entity’s revenues.
Source: Daily News, reported from Dar es Salaam, Tanzania
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