Financial sector ‘must align policies’

June 20, 2009 10:41:11 AM

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The regulator of commercial banks in Fiji says major financial intermediaries operating in the country need to play a more proactive role in the economic recovery process.

The RBF said these financial institutions had always played an important part in Fiji’s economic development.

However, Governor Sada Reddy said: “As we move forward, they must align their policies with the long term economic growth strategies of Government”.

“The recent policy announcements are an important step in that direction,” he said.

Reddy said policy changes on the weighted average lending rate of commercial banks and other licensed financial institutions, and interest rate spread of banks, were an effort to stabilise interest rates and assist in the growth process.

He said these changes were expected to translate to a stable and more conducive borrowing environment for Fiji’s businesses and the people and offer depositors more reasonable returns on savings.

“Some downward movement in the lending rates are already being seen but the full impacts of recent policies on interest rates are still to be seen,” Reddy said.

“The set up of a financial systems development and compliance (FSDC) group at the Reserve Bank and plans to set up specialised microfinance service centres for banks will steer the financial system towards potential growth areas,” he said.  

Reddy said with commercial banks’ assurance to “stringently apply” specified lending guidelines on high priority sectors, the central bank would closely monitor developments in lending, particularly for investment-related projects, export-oriented activities, local businesses and small and medium sized enterprises.

“The plans to now link tourism sector domestic borrowings ton local value added content and environmental protection is expected to encourage the development of local industries, and at the same time to ensure that our fragile environment is protected in line with national environment policies,” he said.