Fi­nan­cial in­sti­tu­tions meet NPL’s re­duc­tion tar­get

Chronicle (Zimbabwe) - - Business -

MOST fi­nan­cial in­sti­tu­tions met the June 30 tar­get of re­duc­ing their Non-Per­form­ing Loans (NPLs) ra­tio to be­low 10 per­cent of to­tal loans, the Re­serve Bank of Zim­babwe (RBZ) has said.

Last year, the RBZ set a June 2016 tar­get for the bank­ing sec­tor to achieve an NPL ra­tio of be­low 10 per­cent and has also tar­geted to re­duce bad loans to five per­cent by De­cem­ber 2016.

An NPL is a sum of bor­rowed money which the debtor has not sched­uled pay­ments for at least 90 days.

In emailed re­sponses, the RBZ said the av­er­age bank­ing sec­tor’s NPL ra­tio was now 10.05 per­cent.

“Many banks have achieved the tar­get NPL ra­tio of 10 per­cent as at 30 June 2016.

“The re­main­ing few banks are in­sti­tut­ing cred­i­ble mea­sures to im­prove the qual­ity of their credit port­fo­lio,” the cen­tral bank said.

“It’s note­wor­thy that some banks have al­ready sur­passed the tar­get of five per­cent as at De­cem­ber 31, 2016.”

The RBZ said as at 30 June 2016, bank­ing in­sti­tu­tions had dis­posed loans amount­ing to $528,40 mil­lion to Zamco.

The Cen­tral Bank cre­ated the Zim­babwe As­set Man­age­ment Com­pany (Zamco), as a spe­cial pur­pose ve­hi­cle to house NPLs in the bank­ing sec­tor.

Zamco uses a com­bi­na­tion of strate­gies to fund ac­qui­si­tion of NPLs, in­clud­ing Gov­ern­ment Trea­sury Bills and loans from for­eign fun­ders.

“In ad­di­tion to the dis­posal of qual­i­fy­ing NPLs to Zamco, the no­table im­prove­ment in the NPL ra­tio is also a re­flec­tion of con­tin­ued ef­forts by bank man­age­ment to strengthen credit risk man­age­ment sys­tems, cou­pled with ag­gres­sive re­cov­ery and col­lec­tions as well as work­out plans,” it said.

Prior to the es­tab­lish­ment of Zamco, the RBZ had noted with con­cern that NPLs, which reached a peak of 20,45 per­cent in Septem­ber 2015, had caused banks to scale down on new loans mainly to pro­duc­tive sec­tors of the econ­omy.

The Cen­tral Bank said Zim­babwe’s bank­ing sec­tor re­mained safe and sound on the back of the var­i­ous mea­sures be­ing in­sti­tuted by the Apex Bank in col­lab­o­ra­tion with Gov­ern­ment. — New Ziana.

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