THE Bankers Association of Zambia (BAZ) says banks in the country are struggling to support key sectors of the economy because they do not have enough funds. BAZ President Leonard Mwanza says the recently increased statutory reserve ratio empowers the central bank to be entitled to as much as 18 percent of all deposits made in Banks. THE Bankers Association of Zambia (BAZ) says banks in the country are struggling to support key sectors of the economy because they do not have enough funds.
BAZ President Leonard Mwanza told the Lusaka Star in a telephone interview today that the recently increased statutory reserve ratio empowers the central bank to be entitled to as much as 18 percent of all deposits made in Banks.
“In simple terms, this means that for every 100 Kwacha deposited, the central bank is entitled to 18 Kwacha,” he revealed.
Mr. Mwanza noted that due to the increase in the ratio, the interest rate for most banks will be affected.
He further explained that the increase in the ratio means that the Central Bank detains a larger portion of the money deposited in Commercial Banks which leaves the banks with less financial reserves.
“You will find that there are many projects that have to be ventured into but because of lack of money, these have to be put on hold,” he said.
The BAZ President emphasized that the association is currently engaging the Bank of Zambia and various stakeholders to ensure that the interest rate ratio on the market is normalized.
Mr. Mwanza explained to Lusaka Star that normalising the situation was the only option as maintaining high rates would disturb the operations of banks in the country.
“If the situation is not handled, it may have a negative impact on other parts of the economy,” he added.
Mr. Mwanza said banks make most of their profit from lending adding that high statutory reserve ratio could cripple operations of these banks.
“To lend money, we should have excess ourselves but the high state reserve ratio means we have less money,” he explained.
The BAZ President has cautioned that disturbing the operations of banks in the country would lead to a huge economic regression.
The statutory reserve ratio was earlier this year increased from 14 percent to 18 percent.
Zambian banks face money shortage
