COMMERCIAL banks this week hiked their lending rates from between 750% and 900% to between 3 000% and 4 500% in response to the upward review of accommodation rates by the Reserve Bank two weeks ago.
The Reserve Bank of Zimbabwe hiked accommodation rates to 4 000% from 1 500%.
Unsecured accommodation rates were reviewed to 4 500% from 1 650%.
The commercial banks said the review was in response to subdued liquidity conditions caused by the central bankâ€™s review of accommodation rates.
â€œThe new development was going to cause a rise in the gearing ratios of most companies thereby worsening their already challenging operating conditions, all which have a negative bearing on capacity utilisation,â€ economic analysts John Robertson said.
Government bank, Agribank, however is charging minimum lending rates of 6 500%.
Economic analysts said financial institutions also need to enhance their credit management operations, as the rise in borrowing rates will automatically result in increased default risk on their portfolios.
They said the minimum lending rates so high that very few companies will be able to borrow.
The hike in rates is a signal that inflation had really spurned out of control.
â€œThe new rates are too high to attract meaningful borrowings by companies. High interest rates have curtailed the growth of bank loan books as borrowers shy away because they have become prohibitive,â€ an economist with a commercial bank said.
RBZ governor Gideon Gono said the accommodation rates would continue to be reviewed in line with the inflation outlook.
Meanwhile the Reserve Bank was on the market on Monday with its 365 day Treasury Bills and allotted bids worth $6,2 trillion.
Interest rates have largely remained unchanged with 7-14 days being quoted at 50%, 30 days 80% and 60-90 days 150%-200%.
By Paul Nyakazeya