Fixed term deposits returns decline

Reserve Bank of Zimbabwe building in Harare

Reserve Bank of Zimbabwe building in Harare

Business Reporter
SOME local commercial banks were providing an annual return as high as 17 percent on fixed term deposits in 2015, although this was a marked decline compared to the rates offered during the previous year, statistics from the Reserve Bank show.

The three-month US dollar deposits, the shortest tenor for time deposit, yielded between one and 17 percent between February and November.

This was a decline from a range of 3 and 20 percent in December 2014, the central bank said in its latest monthly report.

The minimum interest rates on savings was 0,75 percent in November, an increase from 0,15 percent in January while the maximum deposit interest rate was 8 percent.

According to the central bank, the maximum rates on savings peaked in February and March at 12 percent but dropped to 0,3 percent between April and September last year.

While the deposit interest rates offered by some banks appear attractive, the minimum amount required is too high and with the prevailing liquidity constraints, many people may not have spare cash to open highly rewarding fixed deposit accounts.

Average lending rates for individuals declined 12,20 percent in November from 14,16 percent in January. For corporates, the average lending rates fell to 7,67 from 9,66 percent.

The nominal lending rates ranged between 4 and 18 percent in November compared with 6 and 35 percent in January. Nominal lending rates depict the range of rates quoted by banks.

Meanwhile, annual growth in money supply surged to 7,5 percent in November  from 3,2 percent in  October.

On a monthly basis, broad money increased by 3,1 percent to $4,75 billion in November.

The RBZ said the increase partly reflected an improvement in confidence in the banking sector.

The growth in annual broad money was on account of increase in savings deposits, at 12,2 percent; demand deposits, 11,8 percent; and long term deposits, 9,8 percent.

Short-term deposits, however, declined by 10,9 percent. The composition of deposits was as follows; demand, 51 percent; long-term, 21 percent; short-term, 15 percent and savings deposits, 14 percent.

The year-on-year growth in total banking sector credit increased to 23 percent in November from 20 percent in October.

On a monthly basis, banking sector credit increased by 2,9 percent in November to $5,35 billion, from $5,19 billion in October.

Annual growth in credit to the private sector stood at 2 percent in November up from 1,9 percent in October, the central bank said.

Credit to the private sector increased by 1,1 percent to $3, 9 billion in November. The agricultural sector got 22,5 percent,  services  including tourism received 15,3 percent while distribution, manufacturing, mining, transport and communication sectors got 15,2 percent, 14,8 percent, 5,3 percent and 3,1 percent of the credit, respectively.

The contraction sector received 1 percent while households’ shares stood at 18,8 percent  in  November, partly reflecting the dominance of consumptive borrowing in the economy.

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