Gvt to tighten banking sector monitoring

By The NewsDay | Jul. 20, 2012 | 2 Min read

Government is finalising amendments to the Banking Act that seek to address anomalies in the financial services sector and result in deposits earning interest. The amendments, which come in the wake of indiscipline in the banking sector and continued liquidity challenges affecting the country, would also enhance the oversight role of the Reserve Bank of […]

Government is finalising amendments to the Banking Act that seek to address anomalies in the financial services sector and result in deposits earning interest.

The amendments, which come in the wake of indiscipline in the banking sector and continued liquidity challenges affecting the country, would also enhance the oversight role of the Reserve Bank of Zimbabwe. Presenting his Mid-term Fiscal Policy review, Finance minister Tendai Biti on Wednesday said the banking sector was characterised by uncertainties and high interest charges on loans.

“There is a lot of arbitrage, a lot of uncertainties in our banking systems, especially on issues around liquidity, regulations and the banking sector is not playing a greater role in financial intermediation,” he said.

He said the financial sector was now charaterised by what he termed “voodoo banking practices” where interest rates on loans were above 10%, but no interest on deposits.

“We now have a feature we never thought would happen that your money will disappear in a bank and you are told by the bank manager to come and top up yet you put your money in the bank.

“Therefore, we are finalising major amendments to the Banking Act which will focus on improving oversight and surveillance of the financial sector,” Biti said. As part of efforts to ease liquidity challenges affecting the market, Biti said government would soon start issuing Treasury bills at low interest rates.

“We are also working on measures of reducing banking charges and the cost of banking within our sector,” he said.

“On the key question of interest rates, we are crafting a framework to ensure that any deposits in the banking system have some interest rates, limiting the gap between the lending and deposit rate. This is key to our economy if we want to finance manufacturing and any other sector.”