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‘Banks must pay interest on deposits’

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BY MTHANDAZO NYONI

THE Zimbabwe Coalition on Debt and Development (Zimcodd) has rejected claims by banks that they cannot pay interest on deposits because they are not making profit, arguing domestic financial institutions are outperforming their regional counterparts.

Zimcodd’s demand comes amid growing concerns by depositors that Zimbabwean banks were among only a few in the region that have not been paying interest on deposits and savings.

Last year, government gazetted Statutory Instrument (SI) 65A of 2020, which directed banks to start paying interest on deposits and savings.

The SI was part of a broad strategy which kicked off in 2016, promoting financial inclusion in order to stimulate production.

But according to Zimcodd, banks have not complied with the directive.

“The recent synopsis has noted that the sector is making more money, to an extent of exceeding what it did during the peak of the economy in 2014 and making returns higher than their regional counterparts,” Zimcodd said in a report released this week.

“Going back in 2019, Zimbabwean banks performed exceptionally well with return on equity at 33,02%, which was higher than most of the countries in the world,” the organisation said.

In his 2021 monetary policy statement (MPS) released last month, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya gave banks a clean bill of health.

He said the banking sector made $34,2 billion profit during the year ended December 31, 2020.

“The performance of the banking sector was satisfactory during the year ended 31 December 2020, as reflected by the improvement in the key risk and performance indicators,” the RBZ chief said.

“As at 31 December 2020, total banking sector core capital of $40,85 billion, reflected an increase of 94,08%, from $20,99 billion as at 30 June 2020. The growth was mainly attributed to growth in retained earnings, bolstered by revaluation gains from foreign exchange denominated assets and investment properties. Capital positions remain strong in the banking sector. Average capital adequacy and tier 1 ratios of 34,6% and 22,7% as at 31 December 2020, were above the regulatory minimum of 12% and 8%, respectively,” he said.

Zimcodd said this performance placed domestic banks among the region’s top performers.

It rejected recent claims by the Bankers Association of Zimbabwe that banks had also been affected by the economic crisis prevailing in the country.

Zimcodd said the sector’s strong performance was underpinned by non-interest income, mainly the translation gains on foreign currency denominated assets, revaluation gains from investment properties and fees and commissions.

“It is strongly recommended that the Reserve Bank of Zimbabwe should closely monitor the banks’ activities, to provide interest on deposits. The banking public is being short-changed by the banks, with no interest on their deposits,” Zimcodd said.

“In turn, the banks loan out such money and make huge returns no cost. The banking sector is not sweating their assets and in turn short-changing the general banking public. The RBZ should regulate the exorbitant charges by the banks,” it said.

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