Lending Up Slightly (+0.11), Deposits Ease (-0.11)

In September 2025, Tanzania’s interest rate environment remained broadly stable, showing modest adjustments that reflect healthy liquidity and balanced monetary conditions. Lending rates edged upward as credit demand strengthened, while deposit rates slightly declined due to adequate liquidity in the banking system. These movements indicate a resilient financial sector, supported by controlled inflation (3.4%), robust GDP growth (6.3%), and accommodative monetary policy. The overall interactions between lending, deposit rates, and spreads point toward steady financial intermediation and sustained confidence in the economy.

1. Overview of Interest Rate Movements

In September 2025, both lending and deposit interest rates showed stability with minor fluctuations, reflecting consistent liquidity conditions in the banking system.

2. Lending Interest Rates

Key Figures (September 2025)

• Overall Lending Rate: 15.18%
• Short-term lending rate (up to 1 year): 15.52%
• Negotiated lending rate (for prime customers): 12.84%

Movement compared to August 2025

• Overall lending rate increased slightly:
  15.07% → 15.18%
• Negotiated lending rate increased:
  12.72% → 12.84%
• Short-term lending rate decreased:
  15.64% → 15.52%

3. Deposit Interest Rates

Key Figures (September 2025)

• Overall deposit rate: 8.50%
• Savings deposit rate: 2.92%
• 12-month deposit rate: 9.84%
• Negotiated deposit rate: 11.05%

Movement compared to August 2025

• Overall deposit rate decreased:
  8.61% → 8.50%
• 12-month rate decreased slightly:
  9.99% → 9.84%

4. Summary Table — Lending & Deposit Rates (September 2025)

5. Interest Rate Spread

The short-term interest rate spread (difference between 12-month lending and deposit rates) narrowed:

• 5.66 percentage points in August 2025
• 5.69 percentage points in September 2025

This indicates:

• modest convergence of cost of borrowing vs. returns on deposits
• stable financial conditions
• steady competition in the banking sector

Implications of Interest Rate Movements in September 2025

The interest rate data for September 2025, as summarized from Table 2.4.1 in the Bank of Tanzania's (BOT) Monthly Economic Review (October 2025), reflects a stable yet nuanced financial environment in Tanzania. These movements occur against a backdrop of resilient economic growth (6.3% real GDP expansion in Q2 2025, driven by agriculture, mining, construction, and financial services), low and stable inflation (3.4%, within the 3–5% target), and accommodative monetary policy (Central Bank Rate at 5.75%, with ample liquidity via reverse repo operations). Below, I outline the key implications, categorized by lending rates, deposit rates, spreads, and broader economic context.

1. Lending Rates: Signals of Steady Credit Demand and Sectoral Resilience

• Slight Overall Increase (15.07% to 15.18%): This modest uptick suggests banks are responding to robust private sector credit demand, which grew 16.1% year-on-year (y/y) in September 2025—nearly unchanged from August and a key driver of broad money supply (M3) expansion at 20.8% y/y. It aligns with the economy's strong momentum, where financial and insurance services contributed significantly to Q2 GDP growth. However, the rise is tempered, indicating controlled risk appetite amid steady inflation expectations.
• Negotiated Rate Rise (12.72% to 12.84%): Lower rates for prime borrowers (e.g., large corporates) highlight bargaining power in competitive sectors like mining and exports, which benefited from reliable power supply and global commodity price stability (e.g., declining oil but rising coffee/palm oil prices). This supports investment-led growth projected at 6% for full-year 2025.
• Short-Term Rate Decline (15.64% to 15.52%): A dip here points to easing for working capital needs, fostering short-term business activity in agriculture (a major GDP driver) and construction, where adequate food stocks (570,519 tonnes held by NFRA) and subdued energy inflation (down to 3.7% from 11.5% y/y) reduce input costs.
• Broader Implication: Real lending rates remain elevated (15.18% nominal minus 3.4% inflation ≈ 11.8% real), implying significant borrowing costs that could constrain smaller firms but encourage efficient capital allocation. This supports the BOT's goal of fostering growth without overheating, consistent with EAC/SADC convergence criteria.

2. Deposit Rates: Evidence of Improved Liquidity and Savings Incentives

• Overall Decline (8.61% to 8.50%) and 12-Month Dip (9.99% to 9.84%): These reductions reflect excess liquidity in the banking system, as the 7-day interbank rate stayed within the 3.75–7.75% corridor (occasionally below CBR). Banks face less pressure to compete aggressively for funds, thanks to monetary operations absorbing surplus via reverse repos. This liquidity surplus also boosted narrow money (M1) growth to 29.0% y/y.
• Slight Negotiated and Savings Increases (10.99% to 11.05%; 2.90% to 2.92%): Banks are still incentivizing long-term and low-risk deposits to lock in stable funding, aligning with positive real returns (e.g., 9.84% nominal minus 3.4% inflation ≈ 6.4% real). This encourages household savings amid shilling appreciation (+9.4% y/y), enhancing financial inclusion.
• Broader Implication: Declining deposit costs lower banks' funding expenses, potentially enabling more lending without eroding margins. It signals confidence in sustained low inflation (projected to stay within 3–5%), driven by food supply adequacy and easing global oil prices.

3. Interest Rate Spread: Narrowing for Better Affordability and Intermediation

• Slight Widening (5.66 to 5.69 percentage points): Wait—your summary notes a narrowing, but based on the data (12-month lending implied around 15.52% short-term proxy minus 9.84% deposit), it's actually a minor widening from August. This subtle shift still indicates stable financial conditions, with healthy competition preventing excessive spreads.
• Broader Implication: A tight spread (under 6 points) improves credit affordability for borrowers while keeping deposits attractive, supporting financial intermediation. It reflects low policy uncertainty (aligned with global trends) and BOT's liquidity management, which has kept non-core inflation (e.g., energy) cooling.

4. Macroeconomic and Policy Context from the Review

• Support for Growth and Stability: These rate dynamics reinforce the Review's narrative of prudent fiscal/monetary implementation. With M3 growth at 20.8% y/y fueled by private credit, stable rates prevent credit bubbles while aiding export performance (external sector up). In Zanzibar, similar trends likely bolster tourism/agriculture.
• Risks and Outlook: High real rates could dampen SME investment if global uncertainties rise (e.g., trade protectionism). However, positive real deposit returns (amid 3.4% inflation) promote savings, buffering against food price volatility (e.g., rice/maize up due to regional demand). BOT projections: Inflation stable, GDP at 6%, with policy remaining neutral-accommodative.
• Sectoral Ties: Financial markets show steady equity/bond activity, while budgetary operations and debt remain sustainable, allowing room for rate flexibility.

In summary, September 2025's interest rates imply a balanced financial system: liquidity-driven deposit easing offsets mild lending hikes, promoting efficient intermediation and aligning with Tanzania's resilient growth trajectory. This configuration sustains controlled inflation, exchange rate stability, and private sector vitality, though monitoring global commodity/tariff risks remains key.

The Bank of Tanzania’s August 2025 review shows that lending and deposit rates continued to adjust in response to the accommodative monetary policy stance. Lending rates eased slightly, with the overall rate at 15.16% in July 2025 (down from 15.23% in June), while short-term lending declined to 15.51% and negotiated prime customer loans to 12.56%. On the deposit side, rates for time deposits increased modestly, with the 12-month rate reaching 9.88%, while negotiated deposits for large savers fell to 10.72%. The spread between short-term lending and deposit rates narrowed to 5.63 percentage points from 6.66 points a year earlier, signaling lower borrowing costs relative to savings returns and supporting private sector credit growth of 15.9% annually.

1. Lending Interest Rates

• Overall lending rate:
  • 15.16% in July 2025, slightly lower than 15.23% in June 2025.
• Short-term lending rate (≤ 1 year):
  • 15.51% in July 2025, down from 15.69% in June 2025.
• Negotiated lending rate (prime customers):
  • 12.56% in July 2025, down from 12.68% in June 2025.
• Trend: Lending rates are easing slightly, reflecting improved liquidity and accommodative monetary policy (CBR cut to 5.75%).

2. Deposit Interest Rates

• Overall deposit rate:
  • 8.83% in July 2025, up from 8.74% in June 2025.
• 12-month deposit rate:
  • 9.88% in July 2025, up from 9.79% in June 2025.
• Negotiated deposit rate (large depositors):
  • 10.72% in July 2025, down from 11.21% in June 2025.
• Savings deposit rate:
  • 2.90%, unchanged from June 2025.
• Trend: Deposit rates have been slightly increasing for time deposits, but declining for large negotiated deposits.

3. Interest Rate Spread

• The spread between short-term lending and deposit rates narrowed to 5.63 percentage points in July 2025, compared to 6.66 percentage points in July 2024.
• This indicates reduced borrowing costs relative to deposit returns, which can stimulate credit growth.

Table: Lending and Deposit Interest Rates (July 2025)

Economic Implications of Lending and Deposit Interest Rates – July 2025

1. Lending Interest Rates

• Slight Decline: The overall lending rate eased to 15.16% from 15.23%, short-term rates (≤ 1 year) dropped to 15.51% from 15.69%, and negotiated rates for prime customers fell to 12.56% from 12.68%.
• Economic Meaning: This modest reduction aligns with the BOT's CBR cut and improved liquidity (e.g., TZS 758.8 billion in reverse repo operations), lowering borrowing costs for businesses and households. The decline, though small, signals policy transmission, encouraging investment and consumption—key drivers of Tanzania's projected 6% GDP growth. Lower short-term rates (15.51%) support working capital needs, while the negotiated rate drop (12.56%) benefits creditworthy firms, potentially boosting sectors like agriculture and manufacturing (supported by food stock increases to 485,930.4 tonnes). However, rates remain high relative to inflation (3.3%), suggesting banks are cautious about risk, possibly due to lingering global uncertainties noted in the global section.

2. Deposit Interest Rates

• Mixed Trends: The overall deposit rate rose to 8.83% from 8.74%, with the 12-month rate increasing to 9.88% from 9.79%, while the negotiated rate for large depositors fell to 10.72% from 11.21%, and savings rates stayed at 2.90%.
• Economic Meaning: The rise in time deposit rates (e.g., 9.88% for 12 months) reflects banks' efforts to attract longer-term savings amid robust M3 growth (19.9%), ensuring liquidity for lending. This competition for funds supports financial deepening, aligning with Tanzania's goal of mobilizing domestic resources (e.g., savings up 18.7% annually). The decline in negotiated rates (10.72%) for large depositors suggests banks are adjusting terms for institutional clients, possibly to manage excess liquidity. Stable savings rates (2.90%) indicate limited incentives for short-term savings, directing funds toward higher-yield investments or consumption, which could fuel demand-led growth.

3. Interest Rate Spread

• Narrowing Gap: The spread between short-term lending and deposit rates narrowed to 5.63 percentage points in July 2025 from 6.66 points in July 2024, reflecting a more balanced cost-benefit for borrowers.
• Economic Significance: A shrinking spread (from 6.66% to 5.63%) enhances borrowing affordability, stimulating credit demand (e.g., private sector credit at 15.9%). This supports the BOT's growth objective, as lower relative borrowing costs can spur business expansion and job creation. However, the spread remains wide compared to advanced economies (typically 2-3%), indicating banks are still prioritizing profitability, possibly due to high operational costs or non-performing loans. This could limit the pace of credit growth unless offset by further policy easing.

Summary of Broader Economic Significance

• Growth and Investment Boost: The easing lending rates and narrowing spread create a more favorable borrowing environment, supporting the BOT's credit growth target (15.9% achieved) and aligning with GDP growth projections. Rising deposit rates for time deposits enhance savings mobilization, providing a stable funding base for banks.
• Policy Effectiveness: The trends reflect successful monetary policy transmission, with the CBR cut and liquidity injections (e.g., reverse repos) influencing rates, though the high base rates suggest room for further easing to match inflation.
• Potential Challenges: High lending rates (above 15%) could deter small borrowers, while the mixed deposit rate trends might signal uneven liquidity management. In a regional context (e.g., EAC inflation within 8%), Tanzania's rate dynamics support stability but require monitoring to avoid overheating risks.
• Comparative Insight: Compared to 2024's wider spreads (6.66%), the 2025 narrowing aligns with global easing trends (e.g., stable oil at USD 69.2/barrel), positioning Tanzania favorably for investment inflows.

Stability in Lending, Competitive Deposit Market, and a Narrowing Spread Signal Sector Efficiency

In June 2025, Tanzania’s banking sector exhibited notable stability and competitiveness. The overall lending rate held steady at 15.23%, slightly up from May, while short-term lending rates eased from 15.96% to 15.69%, reflecting increased liquidity and competition. Deposit rates rose across the board, with the negotiated deposit rate jumping from 10.64% to 11.21%, driven by end-of-year liquidity needs. Importantly, the short-term interest rate spread narrowed to 5.90%, down from 6.49% in June 2024, indicating improved efficiency and a more competitive banking environment benefiting both borrowers and depositors.

1. Lending Interest Rates

Lending interest rates represent the cost of borrowing from commercial banks and are influenced by factors such as the Bank of Tanzania’s (BoT) monetary policy, liquidity conditions, credit risk, and competition in the banking sector. In June 2025, lending rates remained broadly stable, with minor fluctuations reflecting market dynamics.

Key Lending Rates

The following table summarizes the lending rates for May and June 2025, with changes noted:

• Overall Lending Rate:
  • Increased slightly from 15.18% in May 2025 to 15.23% in June 2025 (+0.05 percentage points).
  • This marginal increase suggests stable credit conditions, with banks maintaining relatively high rates to account for credit risk and operational costs. The stability aligns with the BoT’s monetary policy stance, likely aimed at controlling inflation while supporting economic growth.
  • Compared to June 2024 (15.30%), the June 2025 rate is slightly lower, indicating a modest easing in borrowing costs over the year, possibly due to improved liquidity or competitive pressures.
• Short-Term Lending Rate (loans up to 1 year):
  • Decreased from 15.96% in May 2025 to 15.69% in June 2025 (-0.27 percentage points).
  • The decline suggests increased competition among banks for short-term lending, possibly driven by higher liquidity in the banking system or demand for short-term credit from businesses managing working capital needs.
  • Compared to June 2024 (15.57%), the June 2025 rate is higher, reflecting a temporary tightening in short-term lending conditions earlier in 2025, possibly due to seasonal liquidity demands.
• Negotiated Lending Rate:
  • Decreased from 12.99% in May 2025 to 12.68% in June 2025 (-0.31 percentage points).
  • Negotiated rates are typically offered to prime customers (e.g., large corporations or low-risk borrowers with strong credit profiles). The decline indicates banks are offering better terms to attract or retain high-quality borrowers, possibly due to competitive pressures or improved borrower creditworthiness.
  • Compared to June 2024 (12.82%), the June 2025 rate is lower, suggesting a trend toward more favorable conditions for prime borrowers over the year.

Context and Insights:

• Stability in Lending Rates: The overall lending rate’s stability (15.23% in June 2025) reflects a balanced monetary policy environment, with the BoT likely maintaining the Central Bank Rate (CBR) at a level to ensure price stability while supporting credit growth. The high rates (relative to deposit rates) indicate that banks are cautious about credit risks, particularly for non-prime borrowers.
• Short-Term Lending Dynamics: The decrease in short-term lending rates may be linked to the robust interbank cash market (IBCM) activity, with a turnover of TZS 2,873.9 billion in June 2025 (as noted in the previous query). Higher liquidity in the IBCM, with a slight decline in interest rates (7.93%), likely eased funding costs for banks, enabling them to lower short-term lending rates.
• Negotiated Rates and Competition: The decline in negotiated lending rates suggests increased competition among banks to secure high-value clients. This could be driven by Tanzania’s growing private sector, particularly in sectors like agriculture, manufacturing, and mining, which require significant financing.
• Economic Implications: Stable but high lending rates (15.23% overall) may constrain borrowing for small and medium enterprises (SMEs), which are sensitive to borrowing costs. However, the lower negotiated rates benefit larger firms, potentially boosting investment in key sectors.

2. Deposit Interest Rates

Deposit interest rates reflect the returns banks offer to depositors for savings, time deposits, and other accounts. These rates are influenced by liquidity needs, competition for deposits, and the BoT’s monetary policy. In June 2025, deposit rates generally increased, driven by seasonal liquidity demands at the end of the financial year.

Key Deposit Rates

The following table summarizes the deposit rates for May and June 2025, with changes noted:

• Overall Time Deposit Rate:
  • Increased from 8.58% in May 2025 to 8.74% in June 2025 (+0.16 percentage points).
  • This rise reflects banks’ increased demand for funds, likely driven by end-of-financial-year obligations, such as loan disbursements or reserve requirements.
  • Compared to June 2024 (7.66%), the June 2025 rate is significantly higher, indicating a sustained increase in deposit rates over the year, possibly due to tighter liquidity conditions or higher competition for deposits.
• 12-Month Deposit Rate:
  • Increased slightly from 9.72% in May 2025 to 9.79% in June 2025 (+0.07 percentage points).
  • The modest increase suggests banks are offering slightly better returns to attract longer-term deposits, which provide more stable funding for lending activities.
  • Compared to June 2024 (9.09%), the June 2025 rate is higher, reflecting a trend toward higher returns for depositors, possibly to compete with alternative investment options like Treasury bonds (yields of 14.50%–14.80% in June 2025).
• Negotiated Deposit Rate:
  • Increased noticeably from 10.64% in May 2025 to 11.21% in June 2025 (+0.57 percentage points).
  • Negotiated rates are offered to large or institutional depositors (e.g., pension funds, corporations). The significant rise indicates banks’ willingness to pay a premium to secure large deposits, likely to meet liquidity needs or fund lending activities.
  • Compared to June 2024 (9.86%), the June 2025 rate is much higher, suggesting increased competition for high-value deposits over the year.
• Savings Deposit Rate:
  • Increased from 2.52% in May 2025 to 2.90% in June 2025 (+0.38 percentage points), recovering from a dip in May.
  • Compared to June 2024 (2.86%), the June 2025 rate is slightly higher, indicating a modest improvement in returns for retail depositors.
  • The low savings rate reflects the lower risk and liquidity of savings accounts compared to time deposits, but the increase suggests banks are incentivizing retail savings to bolster their deposit base.

Context and Insights:

• Seasonal Liquidity Needs: The rise in deposit rates, particularly the negotiated rate (+0.57%), is attributed to seasonal liquidity demands at the end of the financial year (June 2025). Businesses and individuals often settle obligations, increasing banks’ need for funds to meet withdrawal demands or loan disbursements.
• Competition for Deposits: The significant increase in negotiated deposit rates suggests banks are competing aggressively for large deposits from institutional clients, who have bargaining power to secure better terms. This could be driven by the high yields on Treasury bonds (14.50%–14.80%), which compete with bank deposits as investment options.
• Retail Depositor Trends: The recovery in savings deposit rates (from 2.52% to 2.90%) indicates banks are also targeting retail depositors to diversify their funding sources. However, the low savings rate compared to time deposits reflects the limited bargaining power of retail clients.
• Economic Implications: Rising deposit rates encourage savings, which can support bank lending capacity and economic growth. However, higher deposit rates increase banks’ funding costs, which could pressure profit margins unless offset by lending income or operational efficiencies.

3. Interest Rate Spread

The interest rate spread is the difference between lending and deposit rates, typically measured for short-term instruments to reflect banking efficiency and profitability. A narrower spread indicates improved financial intermediation and a more competitive banking environment.

• Short-Term Interest Rate Spread:
  • June 2024: 6.49%
  • May 2025: 6.24%
  • June 2025: 5.90%
  • The spread narrowed by 0.34 percentage points from May to June 2025 and by 0.59 percentage points from June 2024 to June 2025.

Context and Insights:

• Calculation: The short-term interest rate spread is derived from the short-term lending rate (15.69% in June 2025) and the 12-month deposit rate (9.79% in June 2025), as these are comparable tenors. The spread is calculated as:
  • 15.69% - 9.79% = 5.90%
• Narrowing Spread: The decline in the spread reflects:
  • Increased Competition: Banks are lowering short-term lending rates (15.69%) and raising deposit rates (9.79%) to attract customers, reducing their profit margins per transaction.
  • Improved Efficiency: A narrower spread suggests banks are improving financial intermediation, passing on liquidity benefits to borrowers and depositors.
  • Liquidity Conditions: The robust IBCM turnover (TZS 2,873.9 billion) and lower IBCM rate (7.93%) in June 2025 indicate ample liquidity, enabling banks to offer better terms to borrowers and depositors.
• Economic Implications: A narrower spread benefits borrowers by reducing borrowing costs and encourages lending, supporting economic activity. However, it may squeeze bank profitability, prompting banks to seek operational efficiencies or alternative revenue sources.

Summary Table

Key Insights and Broader Implications

1. Stable Lending Environment:
   • The overall lending rate’s stability (15.23% in June 2025) and slight year-on-year decline (from 15.30% in June 2024) suggest that credit risk perceptions have not worsened, despite high rates. This stability supports private sector borrowing, particularly for large firms benefiting from lower negotiated rates (12.68%).
   • The decrease in short-term lending rates (15.69%) reflects competitive pressures and ample liquidity, as evidenced by the IBCM’s high turnover and lower rates. These benefits businesses seeking working capital loans, supporting sectors like trade and agriculture.
2. Rising Deposit Rates:
   • The increase in deposit rates, particularly the negotiated rate (11.21%), reflects banks’ efforts to attract funds to meet liquidity needs at the financial year-end. This aligns with the absence of Treasury bill auctions in June 2025, which may have increased banks’ reliance on deposits for liquidity.
   • Higher deposit rates encourage savings, strengthening banks’ funding base. However, the low savings deposit rate (2.90%) indicates limited benefits for retail depositors, potentially constraining household savings growth.
3. Narrowing Interest Rate Spread:
   • The narrowing spread (5.90% in June 2025) is a positive signal for Tanzania’s banking sector, indicating improved efficiency and competition. This benefits borrowers through lower borrowing costs and depositors through higher returns, fostering financial inclusion and economic activity.
   • The spread’s decline from 6.49% in June 2024 suggests structural improvements in the banking sector, possibly driven by technological advancements, regulatory reforms, or increased market participation.
4. Monetary Policy Context:
   • The BoT’s monetary policy likely played a role in stabilizing lending rates and supporting liquidity, as seen in the IBCM’s performance. The CBR, while not specified, is likely set to balance inflation (targeted at 3%–5%) and growth (projected at 5.5%–6% for 2025).
   • The rise in deposit rates and narrowing spread suggest the BoT’s liquidity management tools (e.g., open market operations, reserve requirements) are effective in maintaining a stable financial environment.
5. Economic Implications:
   • The trends in lending and deposit rates support Tanzania’s economic growth by facilitating credit access and encouraging savings. However, high lending rates (15.23% overall) may limit SME borrowing, a critical driver of employment and growth.
   • The competitive banking environment, as evidenced by the narrowing spread, could attract more players to the financial sector, enhancing financial inclusion and supporting Tanzania’s Development Vision 2025 goals.

Borrowing Costs Remain High, Savings Offer Mixed Returns

In January 2025, Tanzania's lending interest rates remained high, with the overall lending rate at 15.73%, slightly up from 15.70% in December 2024. Meanwhile, the negotiated lending rate stood at 12.80%, indicating that creditworthy borrowers could secure better terms. On the savings side, the overall deposit rate declined slightly to 8.31%, but negotiated deposit rates increased to 11.80%, encouraging large-scale deposits. The interest rate spread narrowed to 5.63 percentage points from 6.68% in January 2024, suggesting increased competition in the banking sector and potential future adjustments in lending rates.

Lending Interest Rates (January 2025)

• Overall lending rate: 15.73% (up from 15.70% in December 2024)
• Negotiated lending rate: 12.80% (slightly down from 12.83% in December 2024)
• Short-term lending rate (up to 1 year): 15.70%

Deposit Interest Rates (January 2025)

• Overall deposit rate: 8.31% (down slightly from 8.33% in December 2024)
• Negotiated deposit rate: 11.80% (up from 10.39% in December 2024)
• 12-month fixed deposit rate: 10.08% (up from 9.62% in December 2024)
• Savings deposit rate: 2.97% (up from 2.84% in December 2024)

Interest Rate Spread

• The spread between short-term lending and deposit interest rates narrowed to 5.63 percentage points, down from 6.68 percentage points recorded in January 2024.

These figures indicate that lending rates remained stable with slight upward movement, while deposit rates showed mixed trends, with an increase in negotiated deposit rates. The interest rate spread narrowing suggests banks are slightly reducing the gap between borrowing and lending costs.

The interest rate trends from the Bank of Tanzania with key insights into the current monetary environment and the cost of borrowing and saving in Tanzania

Key Takeaways:

1. Lending Rates Remain High (15.73%)
   • This suggests that borrowing remains relatively expensive for businesses and individuals.
   • High lending rates could slow down investment and economic expansion if businesses find it costly to access credit.
   • However, the slight increase in the lending rate (from 15.70% to 15.73%) is minimal, meaning borrowing costs have remained stable.
2. Negotiated Lending Rates Are Lower (12.80%)
   • Businesses and high-value borrowers with good creditworthiness can negotiate better loan terms, meaning not all borrowers face the highest lending rates.
   • This indicates that banks are willing to offer flexible rates to attract quality borrowers.
3. Deposit Rates Show Mixed Trends
   • Overall deposit rate (8.31%) is slightly lower, meaning banks are not offering much incentive for savings.
   • Negotiated deposit rate (11.80%) is higher, which suggests that large depositors (e.g., institutional investors) can get better returns on deposits.
   • 12-month fixed deposit rate (10.08%) is rising, which encourages long-term savings.
4. Narrowing Interest Rate Spread (5.63%)
   • The difference between lending and deposit rates is reducing (from 6.68% in January 2024 to 5.63% in January 2025).
   • This suggests banks are offering slightly better rates to depositors while keeping loan rates stable.
   • A smaller spread can indicate increased competition among banks or policy measures to make credit more affordable.

Implications for the Economy

• For Borrowers:
  • Businesses still face high borrowing costs, which could slow expansion.
  • However, those with strong financial records can access cheaper loans.
• For Savers:
  • Higher negotiated deposit rates encourage large-scale savings.
  • Lower overall deposit rates mean small savers might not benefit much from interest earnings.
• For the Banking Sector:
  • The narrowing spread suggests competition among banks, which may lead to lower lending rates in the future.
  • Banks may need to balance between attracting deposits and maintaining profitability.