SOME banking institutions have started reviewing loan interest rate and repayment attributing the move to the prevailing market and macro-economic conditions.

In recent months, the market has been characterised by inflationary pressures with the country recording year-on-year rate of 737,26 percent in June.

Despite this,  Government has said it remains optimistic that year-on-year inflation would recede to 300 percent by December.

According to a correspondence seen by Business Chronicle by First Capital head of retail banking, Ms Angela Kamhiriri, to one of their clients, the bank advised that it was reviewing loan interest rate and repayment in line with the prevailing economic and market conditions.

“We write to advise that we have reviewed our loan interest rates in line with the prevailing economic and market conditions.

“The bank is mindful of the impact this may have on you our customers and assures you that this decision was arrived at after careful consideration,” reads part of the document.

The bank said it has a consistent interest rate review process that seeks to align its offering to reflect current market conditions.

“Our aim is to continue to operate sustainably and competitively while servicing your financial requirements.

“In light of the foregoing circumstances we have made the difficult decision to increase our margins to plus 15 percent over and above the bank’s minimum rate, which is 45 percent,” it said.

This effectively takes the new loan rates to 60 percent.

“Your monthly instalments will also change in line with the re-amortisation of the existing loan facilities.

“This will take effect from the 1st of August 2020 for all existing loans.”

The bank further advised that its loan facilities were still available, and advised customers that they can top up after making nine consecutive repayments.

Some bank clients with FBC, also confirmed to this paper that they have received communication from their bank advising of the loan interest rate and repayment review.

A financial market analyst Mr George Nhepera said while it is within the mandate of banks to review their interest rates either upwards or downwards in line with changes in operating environment,  sometimes it was prudent  and  wise not to do so in a manner that negatively affect the borrowers.

“Applying new and high interest rates on existing loan facilities only serve to make it worse for the borrower who will struggle to pay the new and high monthly instalment especially when wages and salaries have been eroded by inflation.

“In my view, the best decision is to apply new interest rates on new loans leaving out the old loans to be repaid under previously applied interest rates,” he said.

“This will be good relief to borrowers who will positively respond by clearing their loans before taking new loans now under new interest rates.”

However, Mr Nhepera said it should be noted also  that some of the outstanding loans where taken by borrowers long time ago when the exchange rates was US$1: ZWL$1.

“Honestly, such borrowers did benefit immensely hence under current conditions they should be able to quickly clear their loans using their increased salaries and wages,” he said.

In the 2020 Mid-term national budget statement, Finance and Economic Development Minister Professor Mthuli Ncube said the inflationary pressures, which subsided in the last quarter of 2019 and in January 2020, resurged from February 2020 to June 2020.

He said the surge in annual inflation is attributed to speculative pricing, arising from forward pricing practice and adverse inflation expectations, following

the depreciation of the Zimbabwe dollar against major currencies in the parallel market.

“However, inflation is expected to gradually decline in the second half of

2020, from the peak of 785,5 percent in May 2020, to 300 percent in December 2020, responding to current monetary and fiscal policy interventions,” said Prof Ncube.