Banks must stop charging interest when interest paid is equal to amount borrowed: Reserve Bank
The Reserve Bank of Zimbabwe has said that banks should stop charging interest payable on loans, once the interest repaid is the same as the amount borrowed. This means that in a worst case scenario the total amount repaid including interest should not exceed double the amount borrowed. In an effort to protect the rights and interests of consumers, the RBZ also said that banks should stop using the flat interest method where the interest paid on a loan remains the same every month. Instead, the interest should decrease as the loan gets paid off every month. The Central Bank said:
Regulated entities should charge interest rates computed on reducing balance basis. Regulated entities should (also) ensure that they comply with the in-duplum rule.
During the tenure of a loan contract, the regulated entity should send or make available to the borrower and the guarantor (if applicable), a statement of account in written or electronic form, at agreed intervals showing, the capital, interest amount, payments received as capital and interest and the annual rate of interestFeedback
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