Outgoing CAL Bank Managing Director, Frank Adu Jnr. has warned the government against capping interest rate.
According to him, such a move will throw the economy into serious challenges.
President Akufo-Addo has directed the Central Bank Governor to find mechanism to push interest rates down as its having a dire consequence on private business access funds to expand their operation.
But speaking at Cal Bank’s ‘Fact Behind the Figures’, Frank Adu Jnr. explained that a cap on interest rates could push the rates to abnormal levels.
“You cannot cap interest rates. From a political perspective, you can attempt but you will pay the price. If interest rates are high, it is not the doing of banks. Banks do not manage an economy. Interest rates reflect the economy that you have created. We can attempt that…as they did in Kenya and see what happens.
“We’ve seen it in this country before– credit ceilings, interest rate cups – we paid a price eventually there was a blow-out, interest rates went out to 42-46 per cent. Good management of the economy will drive what interest rates will do. High-interest rates are not the doing of the banks in any circumstance,” he argued.
Frank Adu Jnr, who retires on December 31 added that, the country’s regulatory and legal frameworks is also an impediment to the reduction of interest rates. For him if the legal system is flexible to the retrieval of the debt in the short time, many banks will respond to the offering lower interest rates.