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Analysts: Collapse of Zimbabwe's Commercial Banks Won't Affect Economy

Observers say the collapse of two commercial banks in Zimbabwe will not have an immediate impact on the country’s economy though they warn of bruising legal battles between the banks, depositors and creditors.

Economists said the Reserve Bank of Zimbabwe’s move Monday to place Interfin Bank Limited under curatorship and the provisional liquidation of Genesis Investment Bank due to operational problems is also set to weaken the confidence of investors and depositors on the banking sector.

But they said it is unlikely that Zimbabwe will plunge into a financial crisis as the two are relatively small banks.

The RBZ placed Interfin under curatorship for a period of six months after it was declared to be in an unsafe and unsound financial position while Genesis voluntarily surrendered its license for failing to meet the minimum capitalization requirements of $12 million.

Executives of the two banks and central bank governor Gideon Gono were not immediately available for comment.

Economist Prosper Chitambara told VOA Studio 7 depositors are worried about the latest developments in the banking sector.

Independent economist Bekithemba Mhlanga said Zimbabwe’s Deposit Protection Fund, set up last year, is expected to come in handy to take care of the depositors and creditors.

Meanwhile, Kingdom Financial Holdings reports that bank deposits rose 21,12% in the first 5 months of the year to US$4 billion from US$3,3 billion recorded over the same period last year as tobacco sales helped to boost the local money market facing serious liquidity challenges.

The bank said while the banking sector continued to witness significant growth in deposits, loans and advances declined by 3,45% with US$2,8 billion loaned out by mid May from US$2,9 billion as at December 2011.

More than 100 million kilograms of tobacco worth US$415.9 million have been sold since the beginning of the marketing season in February this year compared to 104 million kilograms worth US$279,6 million during the same period last year. This year's tobacco prices are higher than last year.