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Farirai Machivenyika

Senior Reporter 

Banks are not complying with a Government directive to pay interest on savings and fixed deposits, Finance and Economic Development Minister, Professor Mthuli Ncube, said this yesterday during the Senate’s question and answer session.

Last year, Prof Ncube enacted Statutory Instrument 65 of 2020 directing banks to pay interest on savings accounts and fixed deposits.

The directive was issued to promote financial intermediation and to stimulate production.

However, the banks have not observed the directive.

“In 2020, I introduced an SI which compelled banks to pay interest,” he said.

“The banks have not really complied and I have directed the central bank to investigate this issue and enforce it (the SI). 

“I also met with the accounting profession and asked them to enforce it during their audits; let it reflect on their (banks) audit statements and if they are complying or not, it should reflect.” 

Prof Ncube said the investigations being carried out by the central bank will expose the levels of non-compliance.

He added that banks were charging high transactional charges and lending rates, which means they could afford to pay interest to depositors.

Banks are supposed to pay an interest rate of not less than 90 percent on Treasury Bills and at least 75 percent for individual and corporates’ savings for a period of 30 days.

In the SI, the RBZ was also granted powers to determine the yields of Treasury Bills and interest on individuals’ as well as corporate balances.

In his 2021 Monetary Policy Statement (MPS) released last month, Reserve Bank of Zimbabwe Governor Dr John Mangudya said the banking sector’s performance last year was satisfactory.

The banking sector recorded a $34,2 billion profit for the year ended December 31, 2020.

Banks also improved in the key risk and performance indicators.

As at December 31, 2020, total banking sector core capital of $40,85 billion, reflected an increase of 94,08 percent, from $20,99 billion as at June 30, 2020, mainly attributable to growth in retained earnings, bolstered by revaluation gains from foreign exchange denominated assets and investment properties. 

Capital positions remain strong in the banking sector, with average capital adequacy and tier 1 ratios of 34,6 percent and 22,7 percent as at December 31, 2020, which were above the regulatory minimum of 12 percent and 8 percent, respectively.