Early this week, the Governor of the Central Bank (BNR) appeared before Parliament to explain the reasons behind commercial banks’ high interest rates and what could be done to tame them.

The lawmakers’ argument was that since BNR had kept its REPO rate (interest rate charged when commercial banks borrow from BNR) constant, slightly over 6%, it should be reflected in the rates banks charge their clients.

From the onset, Parliament worked on the wrong premise that the Governor could arm twist commercial banks.

Free market factors have the final say; they alone can influence the financial characteristics when accessing credit.

One of the many reasons fronted by banks to justify their rates are high overhead costs involved in running a bank such as high rent and employee salaries. Those two are non-starters from the beginning as they should have factored in the banks’ feasibility studies.

For banks to retain the best skilled manpower in the sector, it is obvious they will have to offer attractive packages. As for the high rental costs, that will soon be history as most banks acquire their own premises.

But the journey towards lowering interest rates will have to bring all stakeholders on board, not just leaving BNR and banks to tackle the issue alone.

Among the issues that can be addressed are the high risks of non-performing loans and the poor savings culture where long term deposits are still low. That is where parliament should shift its attention. Non-performing loans could be caused by high interest rates, and vice-versa.

So, if there were concerted efforts to sensitise the public on the benefits of honouring financial obligations and adopting a more robust savings culture, half the journey will have been covered.