The Reserve Bank of Zimbabwe (RBZ) says it remains concerned about the high bank charges and low interest on deposit to consumers as the developments discourage the use of formal banking channels.
In his monetary policy statement on Friday, RBZ governor Gideon Gono said the failure to use formal banking channels will not only be detrimental to the banking sector, but to the economy as a whole.
“In this regard, we urge banks to continue to review their cost structures and pricing policies in a manner that is sustainable to both the banks themselves and their customers,” said Gono.
“Banks are encouraged to focus on building sustainable levels of income from core business sources, such as interest income, which are reliable and stable, as opposed to non-recurring incomes such as bank charges.”
Gono said in view of the widening disparities players in the financial sector should act as responsible citizens and play their part towards reinforcing efforts to achieve sustainable economic growth by encouraging use of formal banking channels, fostering a savings culture in the economy and playing their key role of efficient financial intermediation.
He said the decline in inflation had not benefited the ordinary borrowers and consumers, but banks only.
The central bank chief said the RBZ had come under immense pressure from government, the borrowing public and corporates to intervene.
“Ideally, lending rates should be linked to inflation in a manner that results in positive real rates, as well as taking into account specific risk premium of different borrowers.
With the sustained decline in annual inflation, from above 6% in May 2010 to 2,9% by June 2011, as monetary authorities, we would have expected banks to reduce their lending rates to reflect positive gains in one of the key factors in the determination of interest rates. This is also particularly in view of the stability in the financial sector.”
He said there had been an outcry from the public over the non-payment of interest on deposits by the banking sector, especially when average lending rates are in the region of 30%.
Banks have argued that most of the deposits are short-term in nature and therefore transitory and that the money market is non-functional forcing them to maintain liquid assets in the form of cash on real-time gross system or in the Nostro accounts that do not earn any interest.
A Nostro is an account at a foreign bank where a domestic bank keeps reserves of a foreign currency.