RBZ targets 5% NPLs by 2016

THE Reserve Bank of Zimbabwe (RBZ) says loan default rates in the banking sector will constitute 5% of the total loans by the end of next year as the central bank is taking measures to cleanse the banking sector of non-performing loans (NPLs).

BY VICTORIA MTOMBA

NPLs have been haunting the banking sector, reaching a peak of 20,45% last year. An NPL is the sum of borrowed money upon which the debtor has not scheduled payments for at least 90 days.

As at June 30 2015, the NPL ratio (excluding the troubled Tetrad Bank) was 13,15% from 20,45% during the same period last year.

RBZ governor John Mangudya yesterday said the initiatives to enhance overall credit quality in the banking sector and clear NPL’s in the sector had progressed smoothly.

Mangudya said the Zimbabwe Asset Management Company (Zamco) had begun the cleansing of the bank balance sheet while the full operationalisation of a credit reference system by end of year was expected to address information asymmetry challenges.

“These measures will clear the banking sector of serial defaulters while concomitantly fostering a sound credit culture. Against this background, all banking institutions are expected to work towards a target NPL ratio of less than 10% by 30 June 2016 and 5% by December 31 2016,”Mangudya said.

Mangudya said Zamco had taken NPLs across the banking sector amounting to $188 million translating to 77% of the total portfolio that offered for sale to Zamco in the first phase.

“To date Zamco has acquired $157 million of NPL’s and is currently at an advanced stage in concluding the restructuring of transactions of four distressed companies through acquisition of their banks debts amounting to $58 million. These transactions are expected to be consummated before the end of the third quarter of 2015,” he said.

Zamco was set up by the central bank as a special purpose vehicle to house NPLs in the banking sector which has resulted in a credit crunch with the sector no longer lending to the economy.

Rising defaults have seen banks obtaining writs of execution and attach properties and assets of defaulters.

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