Banks warn they will reduce lending if RBZ directs them to cut interest rates further
The Bankers Association of Zimbabwe (BAZ) has warned that it may be forced to reduce lending if the Reserve Bank of Zimbabwe directs banks to cut interest rates again. The bankers say that in the case that they are directed to cut lending rates they will opt for Treasury Bills which have less risk to them than lending out money.
The central bank ordered banks to cut lending rates which had been as high as 30 percent per annum to between 6 and 12 percent.
BAZ president Charity Jinya told a parliamentary committee on Monday:
The reduction of interest rates may lead to a reduction in lending for some clients depending on their risk profile of those customers so we believe that focusing on interest rates alone might not resolve the funding challenges of the productive sector if the financial views the interest rates to be so low given the high credit risk prevalent in the country,
We would not like to see financial institutions locking up their resources in Treasury Bills which are relatively risk free. We have noted a downward trend in credit creation by banks since the beginning of 2014 while at the same time amounts in treasury bills have been increasing
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