NPLs spike on rising defaults, cash shortages to worsen, RBZ

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THE level of non-performing loans in the banking sector has escalated to an average 20 percent from 18 percent in June on rising defaults as the economy continues to underperform, worsening the cash shortages, the central bank governor John Mangudya said on Thursday.
“They (NPL’s) have been increasing on a monthly basis even without new money being given out. When we introduced the US dollar banks were eager to lend but this has since changed because people do not want to pay back.” Mangudya told a meeting on the financial sector organised by the Zimbabwe National Chamber of Commerce (ZNCC).
“Liquidity is going to be tighter, not because there is no money but the banks are now scared to give out money and all the money is sitting in the banks,” he said.
Banking sector earnings have since tumbled with total profit after tax for banks listed on the Zimbabwe Stock Exchange slowing to $83, 8 million in 2013 relative to $131, 86 million in the prior year.
Mangudya said as of September loans in issue stood at $4.05 billion while deposits had increased from $1.36 billion in December 2009 to $5.2 billion as at October 2014.
Last month, the central bank said some banks had a bad loan ratio of up to 91 percent, a situation it described as ‘frightening,’ and dragging the economy.
The RBZ has engaged the financial service sector with a view to setting up a credit reference bureau in a bid to lower the level of NPLs and is considering amendments to the Banking Act which would also provide a solid legal framework for the fragile sector.
The central bank has also formed a new special purpose vehicle, the Zimbabwe Asset Management Company to house the over $700 million NPLs in the system.
Zamco will work with registered asset management firms to mobilise resources offshore to acquire NPLs to plug holes in banks’ balance sheets.Advertisement