What changed
The Bank Rate was lowered from 9.0% to 8.75%, a reduction of 25 basis points, effective October 29, 2013. Consequently, penal interest rates on reserve requirement shortfalls—previously at Bank Rate plus 3% (12.00%) or plus 5% (14.00%)—were revised to 11.75% and 13.75% respectively.
What it means for you
Banks will face lower penal charges for reserve shortfalls, easing liquidity cost pressures. The Bank Rate cut signals a modest monetary easing, potentially reducing borrowing costs for banks and influencing lending rates over time.
What you must do
- Update internal systems to reflect the new Bank Rate of 8.75% for all linked calculations.
- Revise penal interest rate schedules for reserve requirement shortfalls to 11.75% and 13.75% as per the annex.
- Communicate the rate change to treasury and compliance teams for accurate reporting.
- Monitor liquidity positions to avoid shortfalls and associated penalties at the revised rates.
Who it affects
All scheduled commercial banks, Local area banks, Treasury departments, Compliance and risk management teams
What is the new Bank Rate effective from October 29, 2013?
The Bank Rate was reduced by 25 basis points from 9.0% to 8.75%.
How do the revised penal interest rates on reserve shortfalls work?
Penal rates are now Bank Rate plus 3% (11.75%) or plus 5% (13.75%), depending on the duration of the shortfall.
Does this circular affect all banks?
Yes, it applies to all scheduled commercial banks and local area banks.