The Reserve Bank of Zimbabwe (RBZ) has directed all banks and financial institutions to review interest rates to 200 per cent per annum on loans from the 1st of July 2022. In a statement seen by Pindula News, the central bank said existing loans can be extended on that condition. Pindula News presents the letter addressed to Chief Executive Officers/ Managing Directors of All Banking Institutions, Development Finance Institutions, Deposit-Taking Microfinance Institutions and Credit-Only Microfinance Institutions:
RE: RESOLUTIONS OF THE MONETARY POLICY COMMITTEE MEETING HELD ON 24 JUNE 2022 & PRESS STATEMENT OF 17 JUNE 2022
1. We refer to the Press Statement of 17 June 2022 issued by the Governor, on Outcome of Investigation of Abuse of Commercial Bank Loan Facilities by Certain Business Entities and the Monetary Policy Committee Statement of 27 June 2022.
2. Effective 1 July 2022, all banking institutions, development finance institutions, deposit-taking microfinance institutions and credit-only microfinance institutions are required to ensure that all existing and new loans are extended at an interest rate not below the new Bank policy rate of 200% per annum except for loans drawn under the Medium Term Bank Accommodation Facility, the Micro, Small to Medium Enterprises Facility (MSMEs) and individuals, which shall be extended at a rate not below the Medium Term Accommodation interest rate of 100% per annum. Please note that this new interest rate does not apply to loans covered under employment contracts.
3. Banking institutions are further advised that, effective 1 July 2022:
a) the minimum deposit rate for ZW$ savings has been reviewed upwards from the current 12.5% to 40% per annum;
b) the minimum deposit rate for ZW$ time deposits has been increased from 25% to 80% per annum; and
c) statutory reserve requirements have been maintained at the current levels of 10% for demand and call deposits and 2.5% for savings and time deposits.
4. In addition, banking institutions are required to:
a) Implement appropriate due diligence measures to ensure that borrowing by holding companies for purposes of funding their subsidiaries are properly justified, in line with the Banking Act [Chapter 24:20] and Banking Regulations S. I. 205 of 2000 and that the loans are used strictly for the intended purposes;
b) Ensure that, in line with the sanctity of contracts, no other person may borrow on behalf of another;
c) Put in place effective credit risk management, including loan monitoring and enforcement of loan covenants, client visits and other measures to ensure that borrowings are used for the intended purposes;
d) Comply with the prescribed prudential lending limits provided under the Banking Regulations SI 205 of 2000;
e) Ensure that boards of directors enhance their oversight on the management, reporting and performance of large exposures and group exposures; and
f) Ensure that all lending activities are conducted in line with banking institutions’ credit policies, the Banking Act [Chapter 24:20] and Banking Regulations Statutory Instrument 205 of 2000.
5. The Reserve Bank will continue to monitor conduct of banking business through existing supervisory tools, to ensure compliance and adherence to regulatory requirements.
6. Please note that all banking institutions and deposit-taking microfinance institutions are required to include the compliance status with the minimum lending rates and minimum deposit rates through the Quarterly Compliance Self-Assessment Report due as at 30 June 2022 and on a quarterly basis.
7. We advise accordingly.
P. T. Madamombe
Registrar of Banking Institutions