The number of borrowers submitted by banking institutions to the Credit Reference Databank increased by 36.9 per cent to 1,050,649 at end of April from 767,457 recorded at the year ended last April.
Also the number of loans went up 31.5 per cent and 1,952,974, respectively at the end of April from 1,485,151 recorded at the end of April 2015. Bank of Tanzania’s latest Monetary Policy Statement said there are significant increases in utilization of credit information since establishment of credit reference bureaus in 2013. “(This is) evidenced by increase in the use of their services and participation of non-regulated institutions in the credit reference system.”
The report issued in June said. “The increased use of credit information system is expected to have a positive impact on the number of non-performing loans in the banking sector and interest rate charged by banks in the long-run.” Most banks maintained NPL levels below 5.0 per cent and those with levels above this have been required to bring NPLs to below 5.0 per cent, BoT said.
However, the quality of the banking sector’s assets slightly deteriorated as reflected by the ratio of NPL to gross loans, which increased to 8.3 per cent from 6.7 per cent recorded at the end of March 2015.
Analysts had it that the newly introduced regulation on apportioning of impairment losses on loans and advances to make the sector more vibrate could have had an impact on the bank balance sheets.
Through the new regulation, the Central Bank wants commercial banks to set aside one per cent for every fresh loan until the borrower has made four settlements. Despite assets deterioration, the sector remained sound and stable with levels of capital and liquidity above regulatory requirements.
As at the end of March 2016, the ratio of core capital to total risk weighted assets and off-balance sheet exposures was 18 per cent compared with the minimum legal requirement of 10 per cent.
The ratio of liquid assets to demand liabilities stood at 36.6 per cent, which was above the minimum regulatory limit of 20 per cent. But the sector continues to record steady growth with total assets growing by 14.6 per cent to 26.98tri/- at the end of April 2016, compared to 23.55tri/- recorded at the end of April 2015.
Deposits continued to be the main funding source in the banking sector assets, accounting for 86.1 per cent of total liabilities. The other major source of funding was shareholders’ equity.
Daily News
Something is not right somewhere, the article's contents does not reflect the title chosen by the author. If one says Tanzanian banks have reduced the NPLs and at the same time, he/she indicates that the asset quality of the banks has deteriorated as reflected on NPLs ratio to Gross Loans, then this is a total contradiction. Furthermore, if there is anything to go by, given the title, then there is no justification for the Central Bank to introduce the new impairment regulations which requires the banks to set aside a General Provision of 1% of every fresh Loans until a borrower has met 4 repayments settlement...One begs a question what about a bullet payment loan? How is this type of structured loan be considered in the context of the new impairment regulation.....I suggest the authors spare time to consult with the Banking Industry Experts before releasing such information.. I will be more than willing to offer such insights and expert analysis.
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