Dodoma. Banks that issue loans recklessly will be dealt with, the regulator has warned.
It is said such a trend was raising levels of nonperforming loans (NPLs).
Speaking during the closing of a seminar on economic and business reporting on Friday, December 14, 2018, Bank of Tanzania (BoT) governor Florens Luoga directed financial institutions to exercise due diligence before issuing loans to avoid increasing NPLs.
According to him, banks need to advise loan applicants to ensure that they capable of repaying credit.
NPLs are still a challenge to the banking industry as their ratio to gross loans reached 11.9 per cent in 2017.
Profitability shrank from Sh357.416 billion in 2016 to Sh208.921 billion in 2017, according to BoT figures.
BoT requires NPLs to be below five per cent, but as the going has become tough, the levels have been above the regulatory requirement.
IMF recently warned that bad loans posed a risk to Tanzania’s financial system, with bank asset quality deteriorating.
The NPL ratio industry-wide increased from 6.8 per cent in 2014 to 11.9 per cent in 2017.
Last year, 24 banks had NPL ratios exceeding 10 per cent, the IMF said.
Prof Luoga said BoT would be conducting audits on bankers to remove unqualified ones.
"We aim at ensuring that banks have ethical staff to avoid thefts," he said.