(NEWZIMBABWE) Treasury warns banks over interest rates
Treasury warns banks over interest rates13/03/2013 00:00:00
by Business Reporter
FINANCE Minister Tendai Biti has warned banks against failure to comply with an agreement reached between the central banke and the Bankers Association of Zimbabwe pegging interest rates and other charges for the sector.
Biti told journalists at his monthly state of the economy address that financial institutions which continue to flout measures agreed in the Memorandum of Understanding (MoU) would face stern penalties from the government.
Under the MoU, banks are required to pay an interest of 4% for deposits of US$1000 maintained in the banks for over 30 days at the same time requiring the lending rates for banks to be subject to a maximum rate of not more than 12,5%.
“Reports we are getting from the Reserve Bank as of the 1st of February to now is that whilst the majority of the banks are in compliance with this directive, a few are not,” said Biti.
“So we will be studying the situation carefully and if the situation is such that they are substantial non-compliance with the MoU then as the government we will simply convert the MoU into a statutory instrument.
“This is not our intention but we believe everyone should be bound by an agreement that he or she appends his or her signature on.”
Central bank governor Gideon Gono also told a recent Confederation of Zimbabwe Industries (CZI) meeting that the government may be forced “to apply the stick” to ensure bankers comply with the continuity.
“We do not have an appetite to regulate interest rates; we have no appetite for that,” he said.
“Our wish is to see the banking sector regulate itself, but when we have interest rates going up as high as 60% bringing back the Zimbabwe-dollar era to the dollarized economy. We could not sit idle.”
Meanwhile, Biti blasted the skewed distribution of loans by the financial sector which is heavily inclined towards the non-productive and consumptive sectors of the economy.
“What is of concern however is the breakdown in the distribution of bank loans. Manufacturing is getting the bulk of the loans at 18%-this is fine because this is the productive sector, agriculture is getting 19%, distribution is getting 17%,” he said.
“But what is of concern to us as the government is that households which are in the non-productive sector are receiving 16% of total bank lending and this is not good.
“This means a lot of our productive income and resources, in this era of liquidity challenges, are going into flat screen televisions, zityes from Japan or other things. This is not good and I think these resources could be very well used in the productive sectors.”
Labels: LENDING RATES, TENDAI BITI
posted by MrK @ 12:03 PM
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