Zimbabwe's fragile banking sector stands to lose in excess of $40 million in revenue this year due to massive cuts in bank charges and other service fees.
Following sustained outcry by customers that the charges were too high, the Bankers Association of Zimbabwe (Baz) signed a memorandum of understanding (MoU) with the Reserve Bank of Zimbabwe pledging to reduce lending rates and bank charges.
The MoU came into force on February 1.
Baz president George Guvamatanga this week said a majority of the banks had complied.
"The agreement means we will be taking away just over $40 million in terms of income to financial services sector," he said.
"We want to ensure that it is not only bank charges that have been reduced, but all other charges that have an impact on the cost of doing business."
Guvamatanga said banks were not forced to slash rate "but we expect other players to play their part and also that other services – not only bank – charges will be looked at."
Early this month Finance minister Tendai Biti threatened to introduce a new law to force banks to comply with the new interest rate regime – lowering the cost of borrowing.
Banks are now required to pay an interest of four percent for time deposits of $1 000 and above held over a period of at least 30 days.
The MoU also requires that lending rates at banks be subject to a maximum rate of more than 12,5 percent above each respective bank's weighted average cost of funds.
Under this arrangement, banks are required to charge up to 0,5 percent of cash withdrawal amount subject to minimum charge of $2,50 while ledger fees, maintenance and service fees will cost up to $4 per account.
The central bank and bankers also agreed to push for the mandatory use of debit cards.
Automated teller machines, according to the MoU, will now attract a withdrawal fee of $2.
Point-of-sale machines attract a fee of between 10c and 50c, while no charges would be levied on cash deposits.
However, BAZ argues its members, whose income ratio is 40 percent, will incur huge financial losses.
Analysts say the new measures are a form of price control and history shows that market forces cannot be controlled without dire consequences.