Banks want interest rates autonomy Interest rates autonomy … Sam Malaba (right) speaks to MPs in Harare on Monday

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LOCAL banks want autonomy on interest rates, and say a new directive which gives the central bank final call on the matter was inhibiting competition, Parliament was told on Monday.
The new order followed the expiry of a year-long cap on rates and fees imposed by the central bank following a public outcry over bank charges.
“We were happy when the former governor decided to cancel the memorandum of understanding on bank charges and lending rates and we thought that the minister (of finance) was reconfirming that position,” Bankers Association of Zimbabwe vice-president Sam Malaba told the parliamentary portfolio committee on finance and economic development.
“But we noted that in the acting governor’s monetary policy statement, she highlighted that banks will now be required to seek approval to any charges to their interest rates and lending rates before implementation.”
The directive means that banks are now required to justify increases on interest rates, which are currently ranging between six and 35 percent, while banks wanted to determine the rates according to their cost build-up, Malaba said.
“We felt that this was not necessary and that the banks would act in a prudent manner because they compete against each other, therefore it was unnecessary for us to go into a regulatory environment as we are not regulating any other sector in the economy,” he added.
Interest earned is ranging between 0,15 percent for savings and 20 percent for time deposits.
Malaba urged government to expedite the reintroduction of an interbank market, which is expected to help ease the dollar crunch in the economy.
In his 2014 budget, finance minister Patrick Chinamasa proposed to introduce a $100 million interbank programme supported by the Afreximbank as a guarantor with effect from next month.
“While the current proposed framework looks workable, there are a number of issues that would need to be looked at such as eligible assets which will tend to limit the extent to which the facility will assist the banks in need of the liquidity support,” Malaba said.
BAZ also told the lawmakers that government should set timelines for setting up a credit bureau in a bid to lower the level of non-performing loans and boost confidence in the fragile financial services sector.Advertisement

Official figures show that bad loans rose to 16 percent last year from as low as four percent at the start of the multiple currencies regime.