adminhuge cash balances repatriated from nostro accounts, this has not reflected in an increase in loans and advances, central bank governor Dr Gideon Gono said in a report to the Finance Ministry.
In February, Dr Gono and Finance Minister Tendai Biti said, with effect from March, banks would be required to maintain 25 percent of their nostro account balances offshore to meet their day-to-day foreign payments obligations while repatriating the balances.
This was intended to increase liquidity in the market, which has been suffering from shortfalls since dollarisation.
“Developments in the banking sector show that the market liquidity has been improved as shown by the increase in total RTGS and cash held in bank vaults representing 21 percent of banks’ total holdings,” said Dr Gono.
Total bank deposits as at May 25 stood at about US$4 billion.
Dr Gono said the excess funds held locally were readily available for on-lending to the productive sectors and for inter-bank trading, but appear “as idle”.
“These huge balances being held locally by banks may be as a result of failure by the market to take up loans due to, among other factors, prohibiting interest rates ranging from 10-36 percent per annum and strict lending requirements by banks,” said Dr Gono.
In his state of the economy update for the three months to March, Minister Biti told journalists that Government would put in place measures to address distortions of “crazy lending and non-existent deposit rates”.
Dr Gono said the policy measures to enhance liquidity had been effective. The minimum balances to be maintained in the nostro accounts would be raised to 30 percent with effect from June 30 this year.
Industry has been struggling to secure funding from banks due to liquidity shortages and the high cost of funding. Capacity utilisation has remained below 60 percent as foreign financiers take a cautious approach to invest in the country.
Peter Tanyanyiwa
Online Reporter