CHIEF executives of banks came under pressure at the weekend to act on concerns that financial institutions were fleecing consumers through punitive fees and commission charges on their accounts, while giving little or no interests on deposits.
Reserve Bank of Zimbabwe (RBZ) governor John Mangudya, who made a presentation to legislators during a pre-budget consultation seminar on Saturday, indicated that he would be pursuing moral suasion in his efforts to nudge banks into playing a fair game.
But he indicated that spin-offs of doing the right thing would be multi-pronged, with banks likely to see an influx of foreign currency-indexed deposits flowing into their coffers, while confidence in the Zimbabwe dollar as a store of value would be boosted.
Mangudya, who spoke a day after Finance ministry permanent secretary George Guvamatanga on Friday said government had lined up confidence-building measures to calm the jittery market, has been among a few officials that have slammed banks for pursuing a cautious lending strategy, which has seen them hold up to US$1,7 billion in dormant liquidity while companies struggle.
Non-performing loans were estimated at less than 1% in August, but market watchers said there was nothing to celebrate about as very little was being channelled to fund economic activity.
“(The RBZ will) encourage banks to set appropriate interest rate margins for savings and time deposits to improve the appeal of the Zimbabwean dollar as a value preservative currency and continue to encourage banks to streamline bank charges to stimulate foreign currency deposits by the banking public,” Mangudya said.
“(The RBZ will) take appropriate measures to ensure that foreign currency allotments are settled timeously, pursue a strict monetary targeting framework to ensure that money supply does not destabilise the exchange rate, truant behaviour in the economy is minimised, support domestic savings in local currency through instruments that compensate local currency depositors for potential exchange rate depreciation,” the central bank chief noted.
Perhaps this could be the solution to a depositor flight that has shaken the markets since a deadly financial crisis rattled Zimbabwe between 2003 and 2008.
But depositors have for now preferred to keep their funds at home, instead of trusting a system they accuse of letting them down only a decade ago.
The result has been catastrophic, with US$500 million said to be circulating outside banks.
Giving a keynote address during Friday’s 22nd edition of the Banks and Banking Survey, which was held virtually, Guvamatanga said the process to rebuild confidence commenced with moves to introduce payment of interest on electronics balances.
Zimbabwe’s banking sector has paid the price of waning market confidence since the 2004/2005 financial crisis when operators collapsed under the weight of a corporate governance rot and financial mismanagement that triggered a depositor flight.
But Mangudya has significantly stabilised the sector since coming into office in 2013.
In August, the RBZ chief also encouraged banks to pay interest on deposits, after negotiations with the Bankers Association of Zimbabwe.
Finance minister Mthuli Ncube also presented a paper at the seminar.