Saturday, July 31, 2010

Zimbabwe threatens action on interest rates

Fri Jul 30, 2010 4:50pm GMT Print
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* Bank seeks market-based interest rates
* New deadline for minimum bank capital requirements
By Cris Chinaka

HARARE, July 30 (Reuters) - Zimbabwe's central bank said on Friday it would intervene to force banks to slash "punitive" lending rates of as high as 50 percent that are partly blamed for slowing economic recovery.

A unity government formed by President Robert Mugabe and rival Prime Minister Morgan Tsvangirai 18 months ago adopted the use of foreign currencies including the South African rand and U.S. dollar, which has helped to stabilise the economy and stemmed hyper-inflation.

But Reserve Bank of Zimbabwe Governor Gideon Gono said lending rates had remained too high, with banks charging between 30 and 50 percent, discouraging companies from borrowing.

"Some of the players in the banking sector have completely diverted their interest rate regimes from the co-fundamentals of inflation and fair evaluation of risk profiles in the market, more towards unexplained outrageous punitive lending rates," Gono said in a mid-year monetary statement.

"The Reserve Bank has been left with no other option but to intervene with the immediate introduction of a more robust market-based interest rates framework," he said without offering further details

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