adminrevision of interest rates and fees.
The prevailing high interest rates have been cited as one major reason for companies’ inability to borrow money to replace obsolete plant and equipment.
The banks are quoting between 8 and 30 percent interest on mostly short-term loans, about US$8 month for account maintenance and charges up to 1 percent of the amount withdrawn.
According to the Reserve Bank of Zimbabwe, some of the banks charge as high as 58 percent penal interest on defaulters.
It is against this background that fiscal and monetary authorities have tried, with little success, to persuade banking institutions to review rates and charges to attract more deposits.
An estimated US$2 billion is thought to be circulating outside formal banking channels as people avoid bank charges.
Banking sector sources said most institutions have signed a Memorandum of Understanding on the rates and charges framework, now being evaluated by the Government.
The framework was agreed under the auspices of the Bankers’ Association of Zimbabwe. Efforts to obtain official comments from BAZ, RBZ and Ministry of Finance were not successful by the time of going to print yesterday.
But one bank executive said: “After evaluation, the Government, banks and the Reserve Bank will then sign another Memorandum of Understanding.”
Salient features of the framework include a proposal that banks be allowed to put a reasonable margin on the cost at which they secure the funds, also taking into account the risk factor.
“The banks get the funds from different institutions, such as the Afreximbank and the PTA Bank, and the banks can therefore not quote exactly the same rate,” said the source.
Banks also proposed to levy nominal charges on their bank account holders who have been hit hardest by punitive bank charges.
Finance Minister Tendai Biti and Reserve Bank Governor Dr Gideon Gono have on several occasions threatened legislative action to force banks to review interest rates and bank charges.
While banks quote as much as 30 percent interest on short-term loans, they obtain more than 40 percent of their income from non-funded income, fees and commissions.
The high interest rates and services charges levied by banks come against a situation where depositors’ funds do not earn interest.
Rather, most depositors feel exploited by banks, as their account balances keep falling due to service fees. But in an earlier interview, BAZ president Mr George Guvamatanga argued that the lending rates and service charges were cost reflective and in tandem with those prevailing in the region.
He cited the high cost of operations which the banks needed to recoup, expensive information technology on which banking systems run and the risk of default as factors determining the level of interest lending rates and charges quoted by banks.
Mr Guvamatanga also argued that banks incurred huge costs to recover funds extended to industry, commerce and individuals.
Online Reporter