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Home Business News

GTBank crashes ‘Quick credit’ to 1.33% monthly

Nairametrics by Nairametrics
January 19, 2020
in Business News, Company News, Spotlight
Networking, way to success in Nigeria
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Guaranty Trust Bank, Nigeria’s largest bank by market capitalization, has crashed its interest rate for its ‘quick credit’ facility from 1.75% to 1.33% per month. The bank reviewed its rate, which is published on its website,  as it becomes one of the lowest in the lending space.

Banks on the offensive: In a growing sign of competition in the lending space, Nigerian banks have been playing catch up to their more nimble FinTech counterparts. While more financially robust banks focussed on pouring money into treasury bills and government securities, FinTechs and Microfinance Banks ramped up retail lending.

Nigerians are already used to targeted ads via SMS and across social media platforms offering quick loan incentives such as loans without collateral or lengthy applications previously characterized by lending in Nigeria. Commercial Banks have now joined the fray, albeit with a bit more caution.

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GTB, LDR, DMBs, loan, payday, interest, bank

Banks are now extending these loans beyond employees in structured organizations and now comfortably offer the same to self-employed Nigerians. However, unlike microfinance banks and quick loans banks, you will have to open an account with the bank.

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A Nairametrics survey conducted last year revealed tier 1 banks charged as much as 5% monthly for similar loans. Microfinance Banks such as Page Financials charge as much as 5% monthly. RenMoney another payday loan competitor and one of the pioneers of aggressive lending charges about 2.825% monthly. Some Payday lenders claim their interest rates are free of “hidden charges”.

GT Bank rates appear to be the lowest we have seen so far and could precipitate an interest rate war in an increasingly competitive space. In a sign of the times, ad agencies representing microfinance banks and FinTechs have splashed hundreds of millions on advertising across multiple platforms.

[READ ALSO: CBN may announce new recapitalisation plan soon (Opens in a new browser tab)]

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Effects of monetary policy: Last October, the Central Bank of Nigeria shocked the financial markets with a circular that bounced local investors (except banks) off the lucrative OMO market freeing up over N12 trillion of investable funds. As expected, most of the funds flowed into treasury bills clogging up demand and driving treasury bills rate.

At last week’s auction, 91-day treasury bills fell to as low as 2.9% per annum as investors outbidding offer by 10 folds. Banks were also under pressure from an earlier policy that required that they increase their loan to deposit ratios to 65% or face sterilization of their deposits.

This twin move is thought to have triggered a crash in deposit rates and will inevitably drag lending rates for banks. Nigeria’s inflation rate remains stubbornly at double digits and rose to 11.9% in December, rising for the 4th straight month.

With investors facing a lack of secure investments, banks have taken advantage and have also reportedly reduced deposit rates on time deposits in line with market conditions.

[Read ALSO: Interest rate on T-bills heads for single digit, as investors seek higher returns (Opens in a new browser tab)]

Why this matters: GT Bank’s decision to crash rates for its payday loans could be for two main reasons. The bank is adjusting to a drop in interest rates across the board. Also, considering itself the market leader in the retail lending space, it believes it can beat out competition by dropping rates to a level where microfinance and FinTechs will struggle to compete. With this move, we expect other banks to follow suit with their own rate cuts.

This could unlock a new wave of borrowers or increase the volume of borrowing by those seeking personal loans. Quick Money Banks, who issue loans with little to no paperwork, will have to leverage on their ease of disbursement to compete. Stiff competition could also push down loans to more subprime borrowers who may have nothing to lose when they default.

 

 

 

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Tags: bankCBNFinTechGTBGTBankinterestLoanpayday

Comments 12

  1. Ganiyu lasaki says:
    January 19, 2020 at 11:28 pm

    I need a loan of my house

    Reply
  2. Patrick says:
    January 20, 2020 at 6:59 am

    Good for our economy and growth.

    Reply
  3. Dayo says:
    January 20, 2020 at 2:36 pm

    With this new development from GTB it will also help the society and improve the economy

    Reply
  4. Baba Mohammed yerima says:
    January 20, 2020 at 3:45 pm

    I need a loan for my business

    Reply
  5. Kay Ade says:
    January 20, 2020 at 7:44 pm

    GTB is only approving this for salary accounts and not non-salary accounts as claimed

    Reply
  6. Monsuru Lawal says:
    January 20, 2020 at 8:59 pm

    Please I need loan of 7millon for my business

    Reply
  7. Kingsize says:
    January 22, 2020 at 1:33 am

    Most interested Nigerians are not employees and a large percentage of employees dont have their salary account in GTBank, GTBank should find a way to accommodate SME’s and other categories in their loan scheme

    Reply
  8. Kingsley says:
    January 22, 2020 at 1:34 am

    Most interested Nigerians are not employees and a large percentage of employees dont have their salary account in GTBank, GTBank should find a way to accommodate SME’s and other categories in their loan scheme

    Reply
  9. Abayomi oyewo says:
    January 22, 2020 at 8:53 am

    Pls I need a loan for to repare my truck pls help me

    Reply
  10. Ezekiel Richard says:
    February 8, 2020 at 2:17 pm

    Comment:i need a loan to strengthen my business. i own a school and i need loan.

    Reply
  11. Enoch Emmanuel says:
    April 9, 2020 at 2:54 pm

    Comment:I need loan to pay my school fees

    Reply
  12. UMAR SHEHU says:
    October 5, 2021 at 12:59 pm

    One thing that almost bother me most is that I open an online account with gt bank but I couldn’t remember it now . And my phone number is : 08065775564 . please help me recover it .

    Reply

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