Banks raise November reference rate to 22.7%

Commercial banks have raised the reference rate—an interest rate benchmark— for November 2026 to 22.7 percent from 21.4 percent in October, published statements show.

In separate statements, the commercial banks announced to have adjusted their reference rate to a range of 22.6 percent and 22.7 percent, effective November 4, 2026.

The latest adjustment represents an increase of up to 1.3 percentage points in a month, reversing the downward trend experienced during the first half of the year.

It follows several months of increases since July, after commercial banks reduced the reference rate from 25.2 percent in January to 20.4 percent in June.

The rate subsequently rose to 21.2 percent in September and 21.4 percent in October, reflecting a sustained reversal in borrowing costs.

The development also comes at a time the Reserve Bank of Malawi (RBM) maintains a tight monetary policy stance, with its fourth Monetary Policy Committee (MPC) meeting in October maintaining the Policy Rate at 24 percent.

The MPC also raised the Lombard Rate from 24.2 percent to 26 percent, raising the cost of commercial banks’ borrowing from the central bank.

Economist Marvin Banda said the upward adjustment of the reference rate by the commercial banks was not surprising.

“An unchanged policy rate does not automatically translate into cheaper credit. Remember that the Lombard Rate was raised.

“This has an impact on the collateralised short-term liquidity of the banks by effectively making it more expensive for banks to depend on central-bank liquidity,” Banda said.

Banda said RBM’s decision to raise the Lombard Rate had made it more expensive for commercial banks to access short-term liquidity from the central bank, reinforcing monetary restraint at a time when liquidity conditions remained tight.

He said persistent inflation, high government domestic borrowing and rising credit risks were among factors that were contributing to the pressure on lending rates.

The MPC’s latest statement showed that banking system liquidity had tightened, with average daily excess reserves declining to K82.4 billion in the third quarter from K191.3 billion in the preceding quarter, while commercial banks’ average daily borrowing from the RBM’s Lombard facility increased to K72.3 billion from K25.3 billion.

Private sector credit growth also slowed in the quarter under review to 21.7 percent from 31.3 percent, while annual broad money growth moderated to 19.7 percent from 21.2 percent in the preceding quarter.