Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mushayavanhu, has moved to correct what he described as a widespread misconception regarding statutory reserve ratios, clarifying that the requirement is 15 percent for time and savings deposits rather than a flat 30 percent rate.
Presenting the 2026 Monetary Policy Statement, the Governor addressed confusion in the market about the reserve requirements imposed on commercial banks, explaining the rationale behind the two-tier system introduced to incentivise deposit mobilisation.
“So, it is not true that statutory reserves are 30 percent. They are 15 percent,” Dr Mushayavanhu stated firmly. “The reason why we have two figures—30 percent for demand deposits and 15 percent for time and savings deposits—is to encourage my colleagues, the banks, to bring in the customers that are going to stick.”
The Problem with “Hot Money”
The Governor diagnosed a structural weakness in the banking sector’s funding model, pointing to the prevalence of short-term, volatile deposits that undermine banks’ ability to extend to credit for productive investment.
“Currently, we have people who are depositing money today and they want to withdraw it tomorrow because they are getting zero interest from the banks,” he observed.
Dr Mushayavanhu argued that the differentiated reserve requirements create a clear incentive for banks to transform their deposit base away from this “hot money” toward more stable funding sources.
“If banks can attract savings and time deposits, they should be able to lower their statutory reserves to 15 percent,” he explained. “So, the challenge is no longer with us. If banks want total reserves to go down to 15 percent, they know what to do. They have to encourage their customers to save.”
Unlocking Longer-Term Lending
The Governor linked the structure of bank deposits directly to the maturity profile of lending in the economy, suggesting that the current dominance of short-term loans is a symptom of the underlying liability structure.
“And when you have money that is on sale in the time deposits, you now have a stable deposit base from which we can then do longer-term lending,” Dr Mushayavanhu said. “Because currently, we are seeing banks only extending short-term loans. Why? Because they are sitting on demand deposits.”
The central bank’s position represents a significant policy signal to the banking sector. By maintaining higher reserve requirements on demand deposits—funds that can be withdrawn at any time—the RBZ is effectively penalising banks for relying on volatile funding while rewarding them for cultivating a more stable, savings-oriented customer base.
“So we are maintaining statutory reserves at 30 percent for demand deposits and 15 percent for savings and time deposits,” the Governor confirmed.
The policy is designed to address a long-standing constraint on Zimbabwe’s economic development: the scarcity of long-term finance for businesses and households. By incentivising the shift toward term deposits, the central bank hopes to extend the duration of bank liabilities, thereby enabling banks to match them with longer-duration assets in the form of multi-year loans to productive sectors of the economy.-herald
