Relief as bank customers can now pay loans early without being charged
The matter was first discussed in August between the chief executives of the banks and the regulator before it was concluded by the bankers at their monthly CEO meeting last week.
Commercial bank customers can now opt to pay their outstanding loan balances earlier than scheduled without fear of being charged for the early clearance.
This follows the decision made by the Regulated Financial Institutions under the Uganda Bankers Association (UBA) last month and communicated to the Bank of Uganda last week.
The Executive Director UBA, Wilbrod Owor, said, “the decision by the bankers will take effect on December 1, 2023 in conformity with the minimum 30- day notice requirement for notification of customers, by supervised financial institutions.”
The meeting further agreed that member financial institutions handle communication to their customers as appropriately as possible.
The matter was first discussed in August between the chief executives of the banks and the regulator before it was concluded by the bankers at their monthly CEO meeting last week.
The practice of charging for early loan repayment is aimed at ensuring that the banks do not incur much less earnings, than what they have forecast in view of the loans issued.
This, they said, affects their profit projections and cashflows. However, analysts say that making such a charge on a borrower is the same as punishing them for working hard to return the borrowed money.
UBA said the move will enable the private sector to grow more appetite for credit and ability to repay, hence reducing the risk of nonperforming assets.
