THE Banking sector last year disbursed a total of K21.7 billion to key economic sectors as at end of September 2014.
As at June 30 2013 , the banking and non-bank financial institutions loans and advances increased by 9.1 per cent and 25.0 per cent to K18,135 million and K2,225 million respectively.
Bankers Association of Zambia (BAZ) chairperson Shankardas Gupta said the sector continued to provide to all key sectors of the economy through loans and advances which totalled K21.7 billion.
Mr Gupta said the banking sector remained well capitalised and profitable in 2014 with total assets amounting to K46.8 billion as at September 2014, representing 33 per cent of the country’s Gross Domestic Product (GDP).
As at September 30, 2014, the banking sector performance was solid providing a safe and conducive environment with a total deposit base of K33.7 billion.
In response to a Press query, Mr Gupta said the commercial banks continued to play their intermediary role effectively and to provide competitive banking products to the Zambian public.
“The sector also successfully implemented the T+ 1 Clearing in February and customers are now able to get value for their cheques deposits within 24 hours.
“The economy and the banking sector experienced some turbulence during the first half of the year when the kwacha depreciated sharply against the United State dollar and other currencies, and inflation pressure increased,” he said.
In response, the sector held high level consultations with the regulator, the Bank of Zambia after which the central Bank came up with policy actions, which subsequently stabilised the kwacha and regained about half of its lost value.
Mr Gupta said the local currency had since been trading within range and remained stable and was currently trading at K6.30.
“The overnight lending facility (OLF) was also increased to 12 per cent above the policy rate which has now eased substantially and come down around the policy rate.
“The increase in statutory reserve ratio from 8 to 14 per cent caused an increase in the cost of funds (deposit rates) for the banks.
“Further, the interest rates on Treasury Bills also increased; correspondingly, deposit rates also started increasing taking the cue from these rates,” he said.
Mr Gupta said an easing inflation would bring more liquidity for the banks prompted by the release of funds from the statutory reserves.
This will give a necessary push for credit growth which had slowed down.
Mr Gupta said there was a critical issue of inflation slowly moving from seven to 7.8 per cent by the end of the year and there was need to reverse the same.
“As banks we were challenged with the high cost of funds (deposits), there has been a lower credit dispensation which will affect the economic growth in the long run,” he said.
The economy in Zambia has been resilient and the stability achieved on the exchange over the last seven months shows that the economy has matured and geared to take on the challenges.