Interest Rates to Remain Low: Ram

‘For Fiji any sudden increase in interest rates can dampen economic recovery as financial cost will also increase.’
31 Aug 2022 16:33
Interest Rates to Remain Low: Ram
Chairman for Association of Banks in Fiji and HFC Bank Chief Executive Officer, Rakesh Ram.

Interest rates are an individual bank’s decision, says Rakesh Ram, Chairman for Associa­tion of Banks in Fiji and HFC Bank chief executive officer.

Mr Ram said different banks have their own internal strategies that depict their unique prices for de­posits.

“Some of the contributors would be banks’ excess deposit holding position, risk approaches, demand for credit and strategic vision that is taken in consideration to deter­mine interest rates. All these at­tributes are unique for different banks and hence the price varies.”


He said the interest rates move­ment in Fiji has always been a function of demand and supply for excess funds held in the banking system.

When the demand is higher and available liquidity is lower, there is observable increase in interest rates.

“This benefits the depositors, how­ever it is detrimental to borrowers. Similarly when the level of funds held increases, the interest rates decline and it naturally benefits the borrowers rather than depositors. This is our current situation given surplus liquidity in the market.”

Fiji’s financial market has faced numerous challenges during COV­ID period, Mr Ram said different policy tools and approaches were utilised to combat the negative im­pacts from the pandemic.



“COVID response budget had many supportive tools that were uti­lized to lower the cost of borrowing for clients that ultimately lowers fi­nancial burden for businesses. The Reserve Bank of Fiji has applied different stimulus programmes to support all sectors. Our clients are on longer term stimulus packages ensuring financial steadiness.”

He added that although depositors were earning too low because of low rates, there was immense com­petition amongst banks. However, as a result clients were benefiting with better lending rates.

“As Fiji is in the phase of speedy economic recovery, the banks an­ticipate a lot more economic ac­tivity by customers which should increase transactional volumes and gradually increase demand for credit.

“This can potentially put upward pressure on interest rates however it will be a very gradual process and can be prolonged as well.”


Other Countries:

On Sunday the BBC News stated that the United States of America bank’s chairman, Jerome Powell, had stressed that the banks must continue to raise interest rates to stop inflation from becoming a per­manent aspect of the US economy.

Unlike other countries, Mr Ram said, for Fiji any sudden increase in interest rates can dampen eco­nomic recovery as financial cost will also increase.

“For instance, the potential de­cline forecasted for the home loan market in Australia was an exam­ple closer to home which reflected that interest rates were a crucial element in harmonising the real value for money.


“We cannot just replicate what foreign central banks are deploy­ing. Monetary policy is not one fit for all.”

Meanwhile, Governor for the Re­serve Bank of Fiji Ariff Ali had earlier stated that low interest rates bode well for the economic recovery path that Fiji was on.

The general public would gain as they could borrow at lower rates to finance their investment or con­sumption appetite.

This supports economic activity, gets people em­ployed and contributes to growth. If the economy grows, that benefits the general public and the nation.



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