12 October 2010
Harare — THE Bankers Association of Zimbabwe has defended local bank charges saying they are comparable to the region, although they differ slightly due to high cost of utilities.
In an interview with Herald Business BAZ President Mr John Mushayavanhu said according to a recent study, also sent to the Ministry of Finance, rates levied by the local banks were not out of line with regional trends.
"We have done a study and I can confirm that our rates are very much comparable to the region. There are slight differences because our infrastructure and utilities such as power as we sometimes use generators," he said.
The BAZ president said local bank charges were not exceptional considering other countries such as South Africa even charge their clients for depositing money, which does not happen in the local banking sector.
There has been concern from the banking public, the Ministry of Finance and Reserve Bank that banks were ripping off clients with high charges yet they did not give any interest on account facilities such as current accounts.
In many instances depositors are baffled when they discover that after making bank deposits their balances would be significantly reduced by service and monthly charges, which have discouraged the use of the banking system.
Economists said current account balances are reduced each time the holder withdraws money or asks for a statement with banks charging up to US$3 per transaction. Current accounts may attract 3 percent interest in a year.
Mr Mushayavanhu said bank clients had options to operate either holding or investment accounts. Current accounts, despite the apparently high service charges, do not attract interest on deposits, as they are believed to be meant to facilitate the transfer of money from one point to the other and usually do not hold funds for a long time.
On the other hand, savings accounts, which hold deposits over a fixed period of time, hold funds for a given time allowing banks to also draw on the money for investment elsewhere meaning banks earn a return on them.
Savings accounts, which essentially are demand accounts where the holder may call on the money after a month, are able to attract interest of between six and eight percent.
Clients can also make returns from investment facilities such as fixed term deposits. On average a 60-day deposit, depending on amount, attracts between 11 percent and 15 percent.
Ninety-day deposits presently attract between 12 percent and 16 percent, but the actual rate may be determined by amount invested.
As part of efforts to encourage use of the banking system, said BAZ, banks were now advertising business conditions. He noted confidence was slowly returning to the sector after a decade of instability eroded public trust.
Mr Mushayavanhu said the imminent resumption of lender of last resort function by the Reserve Bank and the existence of the Depositor Protection Board should help improve public confidence in the operations of local banks.
"We have the Depositor Protection Board, which is more like an insurer of banks, which would compensate depositors in the event that a bank goes under," said Mr Mushayavanhu.
Confidence in the local banking sector was shaken after a decade of economic instability when thousands of people lost their money after the country dumped the local currency and adopted the multi-currency system.