Most commercial banks in Zimbabwe are believed to have plunged into panic mode after Finance Minister Tendai Biti announced plans to introduce measures that could eat into a substantial chunk of the financial institutions' income. Sources in the banking sector said the Bankers Association of Zimbabwe has since engaged Reserve Bank of Zimbabwe Governor Gideon Gono for a Memorandum of Understanding around a number of burning issues. Discussions are likely to revolve around the issues of lending, interest and savings rates and bank charges among a host of other matters.
Treasury also wants banks to agree with the RBZ on a framework for lending rates, but with a 10 percent cap above cost of funding. But the most contentious aspect of discussions is likely to centre on the directive that banks should not levy deposits below US$800.
Minister Biti also directed that all deposits above US$1 000 held for over a month should attract interest of a minimum of 4 percent per annum.
"The measures will do more than harm the banks' income. But the banks have engaged the Reserve Bank of Zimbabwe on the Memorandum of Understanding the minister announced," a source said.
"But if you look at the incomes of most people you realise that very few earn more than US$800. It means banks will provide banking services for free and that will cripple banks," the source added.
Efforts to get comment from the Bankers Association of Zimbabwe president Mr George Guvamatanga failed as he did not answer his mobile phone.
Both Minister Biti and Dr Gono have in the recent past expressed strong reservations over "usurious" lending rates, bank charges and commissions banks levy clients yet they offered negligible interest on deposits. Expectations are that the fiscal and monetary authorities will enforce the planned measures through amendments to the Banking Act next year.
Announcing the 2013 Budget Minister Biti also lamented a situation where banks made more than 40 percent of their income from fees and commissions instead of their core business of lending.
However, sources said, BAZ has been lobbying for moderation of some of the directives that Minister Biti plans to introduce next year.
Banking institutions have often defended their actions arguing they were only following the macro-economic fundamentals of the economy.
After a decade of economic instability banks and most other corporates have found it difficult to gain access to affordable lines of credit.
But this spawned a vicious lending rate regime for the little funding banks could mobilise, with lending rates as high as 30 percent per year.