| By Rosli Abidin
Yahya
Local entrepreneurs called for
an adjustment of the Prime Rate currently prevailing at 5.5 per
cent for the last six years.
They felt there is now a
pressing need to reduce the Prime Rate, which is deemed
necessary to stimulate local investment and economy.
The Prime Rate has been
stagnant at 5.5 per cent since around the year 1997 where prior
to that, the lending rate was at 6.5 per cent.
"The relevant agency
should force the financial institutions to reduce the rate if
they did not react to the public opinion," they said.
The Prime Rate is the interest
rate charged by banks to their most creditworthy customers -
usually the most prominent and stable business customers. The
rate is almost always the same amongst major banks. In Brunei
Darussalam, the rate is decided by the Association of Banks.
The fixing of the Prime Rate is
usually based on various factors, including the banks' costs and
desired return, general economic conditions and other factors.
The rate is normally used as a reference point for pricing some
loans.
Adjustments to the Prime Rate
are made by banks at the same time although the prime rate does
not adjust on any regular basis.
The region here including
Brunei Darussalam had been hit by a recession since late 1997
and some nations are still wriggling their way out of the
downturn.
The local economists say the
lowering of the prime rate would stimulate local investors to
invest in this country instead of keeping their money in the
banks because of the high Prime Rate.
At present, the high prime rate
would only encourage investors to keep their money in fixed
deposits, thereby reducing the need to invest. With this
approach, the economy continues to be stagnant in the absence of
investors.
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