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and spur economic growth.
In his Medium Term Monetary Policy Review Statement, RBZ Governor Dr Gideon Gono expressed concern at the structure of bank charges, interest and lending rates although he noted banks’ efforts at financial inclusion.

The central bank chief said he had no intention to legislate interest rate levels in the economy or “for that matter, reintroduce interest rate controls”.
“We are on record for repeatedly stating that our most preferred policy option is for market forces driven allocation and pricing of bank products and services.

“We note with concern that bank charges remain high, and tend to discourage use of formal banking channels by the banking public,” said Dr Gono.
Banks charge a fee of 0,10 percent (per dollar) on cash withdrawal, 0,35 percent on ATM withdrawal, US$4-US$11,50 cheque book fee, US$0,50-US$2 inter- account transfer, 0,10 percent to 0,30 percent ledger fee and US$40 administration, 0,05-0,50 percent for Rapid Transfer Gross Settlement.

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“We urge banks to continue to review their cost structures and pricing policies in a manner that is sustainable to both banks and their customers,” he said.
The central bank governor said he noted with concern the widening disparity between interest banks paid on deposits and lending rates they charged.

He implored banks to “act as responsible citizens and play their part towards reinforcing efforts to achieve sustainable economic growth” and development.
Banks average interest rate on savings stood at between 2,6 percent and 5 percent in June.

Banks gave up to 8.6 percent interest on three months deposit, but quoted interest of up to 30,6 percent on mostly short-term loan.
The central banks said it was concerned by the fact that only banks had benefited from low inflation at the expense of ordinary borrowers and consumers.

The Reserve Bank said it has “come under immense pressure from principals in Government, as well as from the borrowing public and corporates to intervene” as the cost of finance was prohibitively expensive.

“Ideally, lending rates should be linked to inflation in a manner that results in positive real rates, as well as taking into account specific risk premium of different borrowers.”
With the sustained decline in annual inflation from over 6 percent in May 2010, said Dr Gono, they expected banks to reduce their lending rates to reflect positive gains in one of the key factors in determining interest rates.

He said lending rates structures should be a function of inflation plus cost of funds and risk factors such as the risk premium of the intending borrower.
Local banks have taken the liquidity crisis pervading the entire economy to charge interest rates that are abnormally high yet they pay very little on deposits.

Dr Gono said banks should build sustainable levels of income from core business as opposed to non-recurring income sources such as bank charges.