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UBA chairman explains why loan interest rates haven’t dropped despite refinancing rate cuts

YEREVAN, February 25. /ARKA/. Daniel Azatyan, Chairman of the Union of Banks of Armenia (UBA), was asked why interest rates on loans have not decreased after the Central Bank reduced the refinancing rate.

“The refinancing rate began to rise in 2021, from 4.75%, reaching 11%. However, interest rates on loans and deposits did not increase by the same amount. Therefore, we can say that the correlation is not very strong. There is a connection, but it is linear,” said Azatyan.

He further explained that if investments in securities, rather than deposits and loans, dominate the real sector of the Armenian economy, the impact of this change will be much more significant.

“Interest rates on loans and deposits depend not only on the Central Bank’s refinancing rate but, to a greater extent, on supply and demand, as well as decisions made by individuals. I hope that interest rates on loans with floating rates will decrease in the coming months,” said Azatyan.

On February 4, the Board of the Central Bank reduced the refinancing rate by 0.25 percentage points, bringing it to 6.75%.

This marked the 14th consecutive reduction in the refinancing rate since June 2023. -0-        

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