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Banking sector deposits fall

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TOTAL banking deposits declined to $3,7 billion from $4,2 billion due to the liquidity constraints confronting the economy, a Bankers’ Association of Zimbabwe (BAZ) official said yesterday.

Report by Victoria Mtomba

In an interview with NewsDay, BAZ chief executive officer Sijabuliso Biyam said the economy has shrunk and the cost of funds to banks has become expensive.

“Deposits were at $4,2 billion in the past months. As of today (yesterday) deposits are at $3,7 billion,” Biyam  said.

“The source of funding for banks have become expensive and lending has become tighter. Those who will be borrowing now will pay more. The Memorandum of Understanding requires banks to pay 4% on transit deposit that has made borrowing expensive.”

Banks early this year signed an MOU with the Reserve Bank of Zimbabwe that stated banks have to pay 4% on every $1 000 deposited for 30 days.

An analyst said the banks were now faced with a tough situation that required them to pay interest on deposit even if they haven’t benefited from the funds as it would be in the bank for 30 days which was a very short period of time.

“Banks might not make the money per se. The minimum period is not enough for the bank to make an investment,” the analyst said.
He said any economy anywhere in the world during a pre-election period would experience poor investor turn out as investors would be adopting a wait-and-see attitude.

Turning to the banking sector compliance to the revised minimum capital requirements,  Biyam said some locally-owned banks would find it difficult to raise the funds due to liquidity constraints on the market.

The RBZ requires banks to meet $100 million new minimum capital requirements by June 2015. By June 30 2013 banks were required to meet part of the requirements of $50 million.

“There are banks that have head offices outside the country. They would obviously be able to meet the new minimum requirements while local banks would struggle because of the scarcity of money in the market. Some banks will fail to meet those requirements although they are trying through partnership,” he said.

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