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Dr Mangudya

Conrad Mwanawashe Business Reporter
THE non-performing loan ratio has continued on a downward trend retreating to below 13 percent and heading towards the single digit target set by the Reserve Bank of Zimbabwe. The RBZ has set a five percent benchmark for the NPL ratio by next year.

In an interview with The Herald Business, RBZ Governor Dr John Mangudya said the measures that the central bank and the financial services sector have implemented are producing results.

“NPLs are continuously going down,” said Dr Mangudya. Dr Mangudya said the measures being implemented by the central bank and the financial services sector will help to guard against laxity and the growth of the NPLs ratio.

“For now they are around 13 percent. By next year we expect them to be around the benchmark of five percent. So, yes they are continuously going down because banks have measures in place to safeguard against the increasing NPLs,” he said.

In his Monetary Policy statement in July, Dr Mangudya said the banking sector’s aggregate ratio of NPLs to total loans improved from a peak of 20,45 percent in June 2014 to 14,52 percent as at 30 June 2015.

The exclusion of Tetrad which is under provisional judicial management, further improves the ratio to 13,15 percent.

Banks have since surrendered over $188 million worth of NPLs for takeover by the Zimbabwe Asset Management Company.

Financial institutions are saddled with about $577 million worth of NPLs and the RBZ has been working with the sector to clean the institutions’ balance sheets.

“Against a background of high levels of NPLs, and their economy-wide implications, the Reserve Bank has instituted holistic measures to resolve non-performing loans in the banking sector.

“In addition, banking institutions have instituted various measures to resolve the NPLs including the formation of dedicated loan recovery units, refining of credit underwriting standards as well as restructuring of some facilities,” said Dr Mangudya.