More banks raise lending rates

Paul Nyakazeya


COMMERCIAL Banks, Kingdom and Metropolitan have responded to a hike in the key accommodation rate by increasing their minimum lending rates (MLR) to 400% from 295% and 280 % respectively.



justify>Finhold’s commercial banking arm, Zimbank, was the first bank to respond to the increase in the accommodation rate when it hiked its minimum lending rate to 350% from 270%.


Other banking institutions are expected to raise their minimum lending rates before “soon”, a businessdigest poll on the banking institutions established.


But there were questions over the delay by banking institutions in revising their lending rates upwards following the increase in the accommodation rate over two weeks ago.


A bank economist suggested that banking institutions had anticipated fresh measures after a mini policy review by Gono early this month and had therefore postponed increasing their lending rates.


“Banks (had to take) their time as they did not want a situation where they would review their lending rates again,” said David Mupamhadzi.


The Reserve Bank increased the key accommodation rate in mid October 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.


Treasurers from other commercial indicated that a review was looming soon but could not indicate the levels of adjustment.


Analysts said the increase in lending rates was expected, but warned that the current rates remained too high to attract meaningful borrowings by companies.


Lending rates have since the beginning of the year been said to have curtailed the growth of bank loan books because they had become prohibitive to borrowers.


Commecial banks such as NMB and Stanbic bank are still charging 275%, while FBC Bank is lending at 300%.


Zimbabwe Allied Banking Group (ZABG) and Barclays are charging 325% and 250% respectively.


Agribank has an MLR of 250%. CBZ is charging rates that are more attractive at 172%.


Money market dealers said the unstable economic climate would present challenges in terms of the viability of the financial sector.


A market dealer said banks with significantly big loan books could be forced to make higher provisions for bad debts in the coming reporting season because of high default risks on loans.