The Sunday News
Dumisani Nsingo, Senior Business Reporter
FINANCE and Economic Development Minister Professor Mthuli Ncube has implored banks to consider increasing interest rates on savings deposits so as to attract more depositors and bring back confidence to the banking sector.
In an interview with Sunday News Business after officially launching the Deposit Protection Corporation (DPC) Bulawayo regional office last Thursday, Prof Ncube said the Government through the Reserve Bank of Zimbabwe was working on a raft of strategies to enhance public confidence in the Zimbabwean banking sector.
He noted that DPC awareness campaigns, interest on deposits and access to deposits, had a positive relationship to public confidence.
“Bringing up of the (DPC) office here is part of that strategy (of restoring confidence in the banking sector), so that people can feel safe in putting their monies in the banks. So, as we introduce more cash into circulation, they feel safe that their cash is safe and the ATMs (Automated Teller Machines) are able to produce the amount of cash that they desire. So, it’s all part of building confidence and strengthening the bank system,” said Prof Ncube.
DPC was formed on 1 July 2003 to provide compensation to depositors in the event of a bank failure. Depositors are continually channelling their funds through the informal sector and deposits in banks are increasing to be transitory in nature, an indication of low public confidence, despite a regulatory system with an interrelated financial safety net.
Prof Ncube also said there was a need to look into the pricing of financial services in banks, particularly interest rates on savings deposits.
“In future, of course, we have to look at pricing of the financial sector product like the interest rates on deposits, that over time those needs to really go up so that depositors feel that their money is earning something reasonable, while the money is kept in the deposit account that’s something the banking sector should look at and see how they can increase interest rates for our depositors,” he said.
Deposit interest rate is the rate paid by commercial or similar banks for demand, time, or savings deposits. Banks have over the years been accused of fleecing depositors and borrowers through unfair interest rates and charge structures.