Minister for Economy Aiyaz-Sayed-Khaiyum. [File Photo]

Economy Minister Aiyaz Sayed-Khaiyum expects bank interest rates to drop in coming months as a result of prevailing market conditions.

National Federation Party Leader Professor Biman Prasad in Parliament today, says while banks are giving relief by way of deferring loan repayments, they haven’t reduced interest rates.

The NFP Leader adds with liquidity at around $786.1 million as of Wednesday, this needs to be reflected in reduced bank interest rates.

“And I think this is the time that the Reserve Bank will have to use its influence to ensure that commercial banks lending institutions, actually reduce interest rates because Reserve Bank is going to put more money presumably as a result of this change and limit has been increased, and they won’t be putting more money into the system and banks will see further increase in liquidity, and therefore interest rate should go down.”

However, Aiyaz Sayed-Khaiyum says there are a number of debts that are going bad for the banks and they have to make provisions.

“Of course we would like overall the interest rates to come down, but there are a number of determinants. The government cannot go and intervene in the market. There are various ways this can happen is everybody knows that the term deposit rates were very high. But when the term deposit rates actually come down, that people will get off this term deposit the market adjusts itself then, of course, the lending rates will subsequently get lower and you will see in the next few months that the lending rates will come down.”

The Reserve Bank of Fiji says the build-up in non-performing loans could impact financial stability moving ahead.