Regulatory bodies necessary tools to avert exploitation

Public transport tariffs will be revised upwards by up to 7 percent on some routes at the beginning of next month. It is a result of several factors; the increase in fuel and insurance premiums and the installation of speed governors and automated fare collection system.

All the above increased operation costs that needed to be offset and were approved by Rwanda Utilities Regulatory Authority (RURA). Over the last few years, transport fares have fluctuated usually depending on fuel prices, decreasing when the prices go down or increasing when they rise.

That is usually the case in many sectors where prices are capped according to financial factors but there is one crucial sector that has given a deaf ear calls to do the same; the commercial banking sector.

This week the central bank decided to maintain the key Repo rate at 5.5 percent. It is the interest paid by commercial banks when they borrow from the central bank. The rates have been reducing gradually for the last few years and the economy picked up. The current rate was set in December last year, down from 6 per cent.

Logically, the reduction in Repo rates should be reflected by a reduction of interests charged by commercial banks on loans, but that is not the case. Banks have been adamant that their operation costs are high.

It does not need a nuclear scientist to deduce that that is a lame excuse. A reduction of the Repo increases profits when banks maintain their interest rates which may go as high as 20 per cent. Perhaps it’s time for the regulatory body, the central bank, to emulate RURA in making sure there is a win-win situation for all.

 

Have Your SayLeave a comment