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RBZ Governor Says No Bank Shall Extend Loans At An Interest Rate Below Prevailing Bank Policy Rate

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Reserve Bank Of Zimbabwe Governor Dr John Panonetsa Mangudya has said No bank shall extend a loan to an entity or individual at an interest rate below the prevailing bank policy rate.

Mangudya issued a directive that Banks shall implement appropriate due to diligence measures to ensure that borrowing by holding entities on behalf of their subsidiaries are properly justified and the loans are used strictly for the intended purposes.

Dr Mangudya said that, “Banks shall ensure effective credit risk management, ensure that borrowings are used for the intended purposes and ensure that compliance with the prescribed prudential lending limits provided under the Banking regulations SI 205 of 2000.”

In an exclusive with TechnoMag, the central bank Governor said he, “Released a statement where he put in place corrective measures with effect from 1 July.”

The Reserve Bank of Zimbabwe Governor issued the statement on the outcome of investigation of the abuse of commercial bank loan facilities by certain business entities.

In his statement, Mangudya also added that the majority of the entities investigated have adopted business models based on arbitrage, whereby they make significant profit margins by borrowing at concessionary terms.

Most entities generate significant revenues in either ZW$ or US$ or both which are sufficient to cater for their working capital requirements.

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