The banking sector recorded a slightly drop in their non-performing loans (NPLs) one percentage point to 6.5 per cent on year-to-year basis at the end of March.
The ratio, one of indicators to measure soundness of banking sector, shows that the rate is well below the East African bloc rate of 8.0 per cent, but slightly above the country’s benchmark of 5.0 per cent.
The latest Bank of Tanzania (BoT) Monetary Policy Statement issued this month shows that the NPLs ratio to gross loan was the lowest since 2013’s last quarter of 6.7 per cent.
The highest, according to the report was in third quarter 2014 that climbed to 8.4 per cent. BoT said despite the NPLs to be above the threshold, the banking sector remained strong and sound with adequate liquidity and capital above regulatory requirements.
“During July 2014 to April 2015, liquidity among banks was generally satisfactory, albeit with some fluctuations caused by government budgetary operations and downward revision of the SMR ratio from 10 per cent to 8 per cent, (last year),” the report shows.
These developments were also reflected in the movement in the overnight interbank cash market (IBCM) rate and the weighted average yield (WAY) in the Treasury bills market.
The WAY which was elevated to double digit levels since October 2011, eased to single digits beginning March 2015.
However, the rate picked up again in mid-May 2015 following the Bank’s decision to re-instating the SMR ratio to 10 per cent in May 2015, due to excessive volatility of the shilling against the US dollar.
The Bank also reduced banks’ prudential limit on foreign currency net open position from 7.5 per cent to 5.5 per cent of core capital and enhanced foreign exchange sales in the IFEM.
Originally published on DailyNews Tanzania