Gono scraps cash withdrawal limits

Gono scraps cash withdrawal limits
Published: 28 February 2012 (1443 Views)
BANKS will scrap the advance notice requirement for all cash withdrawals above US$10 000 with effect from Thursday as measures taken by Finance Minister Tendai Biti to ease liquidity challenges in the economy take effect.

Key measures announced to help ease the liquidity crunch included the liquidation of US$110 million worth of Zimbabwe's Special Drawing Rights from the International Monetary Fund and repatriation by local banks of funds held in their nostro accounts.

Last week Minister Biti said banks had so far repatriated US$71 million in the nostro accounts since the order for banks to repatriate 75 percent of the money they are holding in their offshore accounts was issued.

He added that Treasury expected the remaining US$127 million to be returned by last Friday.

Yesterday Minister Biti could not be drawn to explain whether all the measures to improve liquidity in the economy had been effected.

On the liquidation of the US$110 million SDRs, he said: "What connection is there between the cash withdrawal limits and the SDRs? I do not see a connection."

However, the Bankers' Association of Zimbabwe yesterday said Minister Biti was still in the process of liquidating the SDR funds to be injected into the economy through support to key infrastructure projects, agriculture and the Reserve Bank of Zimbabwe.

From tomorrow, financial institutions will use their discretion on such transactions based on their knowledge of the customers' record. The notice requirement for instant cash withdrawals above US$10 000 was meant to give banks adequate time to prepare to pay out such transactions.

RBZ Governor Dr Gideon Gono announced last week at a joint Press briefing with Minister Biti that the withdrawal limits would be scrapped.

"In view of the improving liquidity situation in the economy and the need to encourage savings and use of the formal banking system, the Reserve Bank will be lifting the previously announced cash withdrawal limits with effect from March 1 2012.

"Banks are encouraged to continuously apply the Know Your Customer principle in order to avoid the abuse of cash," Dr Gono said.

BAZ president Mr John Mushayavanhu said the lifting of the restriction followed the realisation that many people were making large cash withdrawals.

"They realised that you cannot apply a blanket restriction on all customers. Some customers have to pay large amounts all the time while others do not have to do that frequently," he said.

The KYC principle would enable banks to serve their customers, manage their liquidity and abide by global laws on preventing abuses such as money laundering.

The African Development Bank last week said the cash withdrawal limits were counter-productive to the economy.

"Cash limits can result in weakening bank depositor confidence, panic withdrawals, reduced bank deposits, deposit flight from weak to strong banks, externalisation of cash and investments in illiquid assets," said the AfDB.

- th

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