Harare - Zimbabwe's central bank on Tuesday hiked tenfold statutory capital requirements for merchant banks to $100m to restore confidence in the banking sector following last week's collapse of a local bank.
The rates are also applicable to commercial banks, which previously needed just $12.5m while those for merchant banks were increased from $10m.
The banks have two years in which to raise the capital, but must by year end have doubled their current capital base.
"By the end of this year commercial banks must have no less than $25m as capital," central bank governor Gideon Gono, said in his mid-term monetary policy in the capital Harare.
The new measures come days after Royal Bank, a commercial bank, was closed last week due to undercapitalisation, and liquidity crisis.
"Indiscipline in the banking sector has once again reared its ugly head. This is evidenced by increased abuse of depositors funds," Gono said.
He reiterated that banks must not be targeted by the country's indigenisation laws which forces foreign owned companies to cede majority stakes to local blacks.
Gono said Zimbabwe's economy remains fragile with low export earnings, lack of credit lines or foreign direct investment resulting in the liquidity crunch.
"The economy is facing a crisis which cannot be ignored. There is need for action. We are in a deep crisis,"he said.
"In an enviroment where companies are closing day in, day out and there are no exports but there are huge imports particularly in consumptive goods, the day of reckoning is not too far."
Gono said the country was mulling the introduction of treasury bills of between 90 days and a year to improve liquidity in the economy.