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Conrad Mwanawashe Business Reporter
LOCAL banks have raised concern over the Reserve Bank of Zimbabwe’s directive compelling them to seek approval before raising charges or interest rates saying such a move was tantamount to unnecessary controls.RBZ Acting Governor Dr Charity Dhliwayo directed that banks should justify increases in charges or interest rates from the October 2013 levels before approval is granted by the central bank. This is on the backdrop of the non-renewal of the Memorandum of Understanding between the Reserve Bank and banking institutions signed in January 2013 which caped the interests’ rates.
Dr Dhliwayo said this was necessitated by the need to avoid unjustified increases in charges and interest rate by banks, and to promote informed decision making by the banking public.
“This will assist the regulator in monitoring ‘collusion’ on pricing as well as evaluating banks’ cost structures in relation to bank charges,” she said.
But bankers feel the requirement to seek approval before increasing charges was introducing controls clandestinely.
Giving oral evidence before the Parliament’s Portfolio Committee on Finance and Economic Development, vice president of the Bankers Association of Zimbabwe, Mr Sam Malaba said the central bank should allow the banks to determine their interest rates according to their cost build-up.
He said an application for interest rate increases was equivalent to controls hence detrimental to market forces.
“This is equivalent to controlling the charges that banks are setting. We are working in terms of market operations and we don’t believe it’s necessary for the banks to be regulated with regards to charges and interests rates. We live in a competitive environment and banks compete against each other and so banks would not unnecessarily increase charges in a competitive environment,” said Mr Malaba.
Banks are currently charging lending rates ranging between 6 percent and 35 percent per annum.
“We don’t believe we are an irresponsible sector that would unjustifiable increase prices without justification and if that were the case there would be no need for us to seek prior approval,” said Mr Malaba.
However, the central bank acting chief urged banks to upgrade their core banking systems and delivery systems to promote efficiency which would assist in reducing the cost of service delivery which translates to lower charges for the banking public.
“Empirical evidence indicates that banks’ strong reliance on charges to cover operational expenses is a reflection of inefficiencies in service delivery,’ Dr Dhliwayo said.
BAZ said it is, however, satisfied with the policy interventions that were outlined in the Monetary Policy Statement.
Online Reporter