THE Reserve Bank of Zimbabwe (RBZ) has directed all banks to ensure that international card switches facilitate local settlements of local transactions in Zimbabwe, as the central bank seeks to improve the position of nostro accounts.
BY TATIRA ZWINOIRA
This comes as nostro accounts utilisation by transactions amounted to $2,49 billion between July and December 2016, which represents foreign payments. Nostro accounts hold foreign currency of local banks in foreign financial institutions, meaning, foreign payments are funded by nostros.
In his monetary policy statement released last week, RBZ governor, John Mangudya said Visa local settlement would go live by the end of February 2017, while MasterCard local settlement by the end of this quarter.
“The bank [RBZ] has directed all banks to ensure that the international card switches facilitate local settlement of local transactions in Zimbabwe. This arrangement will allow Zimbabwean banks to carry out interbank settlements within Zimbabwe. To this end, Visa local settlement will go live by the end of February 2017, while MasterCard local settlement will be enabled by the end of this quarter,” he said.
Mangudya said the development was critical in saving foreign currency and stimulating enhanced efficiencies for local transactions.
He said the domestication of settlement will result in corresponding reduction of costs for customers in line with prevailing domestic transactions. As at the end of last month, there was about $304 million in nostro accounts. Banks have been capping the usage of Visa and MasterCard to limit the usage of these cards, as they are funded by nostro accounts.
Mangudya said they would be enforcing market and institutional discipline to domesticate the settlement of local card transactions on international card switches, as it seeks to stabilise nostro accounts.
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“This measure has been necessitated by the need to ensure that nostro accounts are used for foreign payments and that domestic transactions are settled locally through platforms such as real time gross settlement system, ZimSwitch, Visa, Mastercard, local mobile banking and/or cash and bond notes,” he said.
“Utilising nostro accounts to settle domestic transactions put unnecessary pressure on the country’s foreign exchange reserves that should ideally be used for international or offshore payments.”
In recent weeks, the central bank and the banking sector have been advocating depositors to use local debit cards for local transactions to avoid double-dipping of nostro accounts.
Nostro utilisation by transaction was split, with the RBZ funding $360,87m worth as $2,13bn came from the banks during the period under review.
