THE Reserve Bank of Zimbabwe (RBZ) said on Friday it would intervene to force banks to slash "punitive" lending rates of as high as 50 percent that are partly blamed for slowing economic recovery.
A unity government formed by President Robert Mugabe and rival Prime Minister Morgan Tsvangirai 18 months ago adopted the use of foreign currencies including the South African rand and U.S. dollar, which has helped to stabilise the economy and stemmed hyper-inflation.
RBZ Governor Gideon Gono said lending rates had remained too high, with banks charging between 30 and 50 percent, discouraging companies from borrowing.
"Some of the players in the banking sector have completely diverted their interest rate regimes from the co-fundamentals of inflation and fair evaluation of risk profiles in the market, more towards unexplained outrageous punitive lending rates," Gono said in a mid-year monetary statement.
"The Reserve Bank has been left with no other option but to intervene with the immediate introduction of a more robust market-based interest rates framework," he said without offering further details.
Zimbabwe's inflation peaked at 500 billion percent in December 2008 according to IMF data, while interest rates rose above 1,000 percent. But the introduction of the multi-currency regime has seen inflation return to single digits.
The index eased to 5.3 percent year-on-year in June from 6.1 percent in May.
Gono also said the central bank was scrapping a requirement for banks to keep five percent of their cash holdings with the central bank in a bid to free more funds for lending.
Zimbabwe registered its first growth in a decade last year, but analysts say the country is struggling to attract foreign aid over controversial policies being pursued by Mugabe's ZANU-PF party.
Although the IMF has warned that Zimbabwe's banking sector faces systemic risks, Gono said 17 of the country's 24 financial institutions had met a June 30 deadline to raise the minimum capital threshold to $12 million.
The remaining seven had been given a new deadline of December 31 to comply, he said.