Financial institutions meet NPL’s reduction target
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.