The reduction in policy rate in May this year by 100 basis points to 13.5% will positively impact the commercial bank’s savings rate, as revealed by RBM spokesperson Mbane Ngwira told The Nation newspaper that it is expected that banks will be able to raise more savings.

Figures by RBM show that the savings rate has been maintained at 4.58% since the first quarter when the policy rate fell by another 100 basis points to 14.5%, while prior records show that  savings rates have continued to dwindle inconsistently at 5% of gross domestic product [GDP] in 1990, minus 3% in 1993, 10% in 1994, minus 4% in 1996 and -2% in 1999.

The impact of the policy rate towards savings arrives amidst mixed reactions by banks, towards the downward review of the policy rate. During the April policy rate review, it was stated that banks would either be positively or negatively affected by the development. True enough, Standard Bank plc attributed its 13% profit loss to the Reserve Bank of Malawi’s policy rate cut, that lowered income, despite registering increased lending to customers. The loss was recorded at K12 billion in 2017 to K10.5 billion in 2018.