FINHOLD’S commercial banking arm, Zimbank, this week became the first commercial bank to respond to a hike in the key accommodation rate by increasing its minimum lending rate (MLR).
Other banking institutions are expected to raise their MLRs before month-end, a businessdigest poll on the banking institutions established.
“The increase was going to put pressure on commercial banks to revise their rates (upwards,” bank economist, David Mupamhadzi, told businessdigest.
The Reserve Bank last week increased the key accommodation rate from 300 to 500% for secured lending and from 350 to 600% for unsecured lending.
Unsecured borrowing is when an institution seeks funding from the central bank without security. Treasury bills and other money market instruments can be used as security when accessing lending from the central bank.
Zimbank said yesterday it had increased its MLR to 350% from 270%. The new MLRs were with effect from Monday, the bank said.
The MLR for the bank had been at 600% per annum.
Treasurers from the 12 other commercial banks interviewed by businessdigest said they anticipated to increase their MLRs next week.
They refused, however, to indicate the rate of increase likely to be effected on the MLRs, but indications were that these were to fall within the same level as Zimbank’s.
The average MLR for commercial banks is at 290%.
Analysts said the increase in lending rates was expected, but warned that the current rates remained too high to attract meaningful borrowings by companies.
Mupamhadzi said high interest rates had since the beginning of the year curtailed the growth of bank loan books because they had become prohibitive to borrowers.
The central bank said the adjustment was not contestable in terms of the in-duplum rule, adding that it had tightened the overnight window to ensure that it (central bank) was not used as a primary source of funds.