Banks with operations in Zimbabwe have demanded a six-month respite to execute government’s proposed reforms which include lowering fees while also forcing banks to pay interest on deposits, it emerged on Friday morning.
This follows a clarion call from the finance minister, Tendai Biti, during his national budget statement late last year, that banks, starting this month, should not levy fees on deposits of less than $800, pay interest on deposits of at least $1000 held over 30 days at 4 percent per annum.
But the Bankers Association of Zimbabwe (Baz) has argued its members, whose income ratio is 40 percent, would incur huge financial losses.
Analysts told Zimbabwe Independent that Biti’s proposals were a form of price control and history shows that market forces could not be controlled without dire consequences.
“If anything, margins have been trimmed and this will work against efforts being made by players to mobilise resources to meet the new capital requirements set by the Reserve Bank,” analysts said.
Baz needs a temporary suspension in order to allow banks to change their models to the new requirements.
According to the Zimbabwe Independent, the association believes the solution lies in changing the banking model to one which promotes and encourages card usage and e-banking.
“Naturally, this will need time and resources to allow banks to change to this model, which will phase out most of the bank’s brick and mortar operations,” Baz said.
In the interim, the association is proposing a special low-cost account to be called Zim Transact, which will be for maximum deposits of $300.
They are also proposing the creation of a spread fixed deposit account to attract a higher rate of interest depending on the quantum.
They also want a higher spread to clients with a high-risk profile or those who borrow to purchase luxury items on the spread of loans.
The association said 70 percent of individual banking customers earn less than $800 per month which would imply free banking for a majority of Zimbabweans and banks currently generate 60 percent of their income from loans and advances, and 40 percent from non-interest income.
“As at September 30, 2012 banks’ overall profits were in the region of $90 million and therefore a reduction of $72 milion revenue annually will create severe viability and sustainability challenges for the banking sector,” Baz said in a statement.