RBZ issues statement on commercial bank lending

The Reserve Bank of Zimbabwe (RBZ) yesterday issued a statement on the findings of the investigation into the abuse of commercial bank lending facilities by certain commercial entities.

The press release indicates that the majority of the entities studied have adopted arbitrage-based business models, in which they realize significant profit margins by borrowing on favorable terms.

Most entities generate significant revenues in ZW$ or US$ or both that are sufficient to meet their working capital needs.

According to the press release viewed by Bulawayo24.com, the bank has implemented corrective measures effective July 1.

The stipulated measures state that “No bank shall make a loan to any entity or individual at an interest rate lower than the prevailing bank rate.

Banks shall implement appropriate due diligence measures to ensure that borrowings by holding entities on behalf of their subsidiaries are duly justified when the loans are used strictly for the intended purpose”.

The statement also stressed that banks must ensure effective credit risk management, ensure that borrowings are used for their intended purpose and ensure compliance with prudential lending limits prescribed by Banking Regulations SI 205 of 2000.

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