COMMERCIAL banks this week began slashing minimum lending rates (MLR) after the central bank last week drastically cut accommodation rates, but analysts s
ay the lending rates remained too high to attract borrowings.
Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono on Monday last week reduced accommodation rates significantly, saying banks had to unlock funds to the productive sectors to spur economic growth and fight inflation.
The accommodation rate, the rate at which financial institutions borrow from the RBZ to cover daily shortfalls, went down to 300% for secured borrowing, from 850% before Gono’s policy announcement.
The accommodation rate for unsecured lending was reduced to 350%, from 900% before the new monetary policy measures.
Zimbank, the commercial banking arm of the Zimbabwe Financial Holdings, lowered its MLR to 270%, from 560%.
In a statement to clients, Zimbank said the decrease was in line with recent market developments.
Barclays Bank reduced its lending rates from 550% to 340%. Banking sector sources said other commercial banks were already recalibrating their lending rates in line with the latest reduction in the policy rate.
Kingdom Bank, MBCA and Stanbic Bank are presently charging minimum interest of 550% on loans.
NMB Bank and the Zimbabwe Allied Banking Group’s MLR are at 500% while CBZ has its MLR pegged at 465%, the lowest among commercial banks.
CFX Bank is charging 600%.
Economic analysts said the decrease in lending rates by commercial banks was expected, but warned that the new rates remained too high to attract meaningful borrowings by companies.
High interest rates had curtailed the growth of bank loan books as borrowers shied away because they had become prohibitive.
“The decrease (was inevitably going to) put more pressure on commercial banks to revise their rates,” said David Mupamhadzi, an economist with a local financial institution.
Presenting the mid-year monetary policy review on July 31, Gono said it had become necessary to reduce accommodation rates “so as to balance the virtues of anti-inflation demand management interventions with continued flow of credit to the productive sectors of the economy”.
He said accommodation rates would continue to be reviewed in line with the inflation outlook. A continued reduction in the inflation rate result in further interest rate reductions, he said.
“We call upon the banking industry to realign their interest rates accordingly so as to sharpen the transmission mechanism of monetary policy into the rest of the economy,” Gono said.