FINANCIAL institutions are expected to further reduce lending rates as the Reserve Bank of Fiji seeks to see rates drop to December 2008 levels.
Governor Sada Reddy said while the banks might not be happy with the decision, they had been asked to co-operate in reviving the economy.
"Lending rates of our licensed banks were going down in 2008 but in the first three months of this year, they increased substantially," he said.
"The RBF was forced to introduce policies in April to bring the lending rates down. This was important, especially at a time when our economy was being hit by the global downturn and also the effects of severe flooding in early January.
"The lending rate is now down to about 7.8 per cent. I expect it to go down further, because we have told the banks to take their average lending rates down to the levels of December 2008, so there are still some more reductions to be seen."
Mr Reddy said the weighted average bank deposit rates, which were falling last year, have since improved. He expected deposit rates to be positively influenced by the RBF's policy directive on bank spreads implemented in April, which had been set at 4 per cent.
"These were very tough decisions, but we had to take them to assist the growth of our economy and I must say that the banks are co-operating well with the Reserve Bank.
"We would like to think that our policy efforts this year have been successful, in the sense that foreign reserves and banking system liquidity have improved to comfortable levels and interest rates have started to drop, thus assisting in economic recovery."
