Tanzania’s central bank orders lenders to rein in bad loans

Dar es Salaam. Bank of Tanzania (BoT) has ordered banks and financial institutions to ensure that there would be no new non-performing loans (NPLs) generated due to failure of following robust credit granting and management process.  

A central bank communiqué on Wednesday, February 21, to banks and financial institutions, which was availed to The Citizen, directs the entities to formulate strategies that would increase credit to private sector but generate no NPLs.

The country’s financial regulator also wants the establishments to design specific strategies aimed at improving credit-granting process as well as reversing NPL trends.

In the past two years, the level of NPLs in large commercial banks have been expanding while profits declining as the sub-sector has been struggling to cope with operational challenges, the communiqué shows.

According to BoT, having high NPLs is not healthy for the banking sub-sector as well as for the economy.

The communiqué further revealed that the financial institutions were strictly required to comply with conditions provided for in the relevant laws of the land, failure of which regulatory penalties and sanctions would be imposed.

Furthermore, the BoT directed that banks and financial institutions would be releasing their reports on the quarterly basis, a move that will help control NPLs as well as improve the credit landscape in the country.