According to National Credit Regulator, fees on savings bank account could discourage consumers from saving their money in accounts of South Africa.
According to National Credit Regulator, fees on savings bank account could discourage consumers from saving their money in accounts. South Africa's 4 main banks were asked to answer in front of an inquiry regarding high service charges and the control over national transaction & payment system.
Banking Inquiry of Competition Commission aims to establish relationship between fees charged by banks & cost of offering banking services & the prospect of introduction of competition in offering services in South Africa (SA) banking sector.
Nation Credit Regulator's CEO, Gabriel Davel, said in the inquiry that except one financial organization, returns for all entry-level savings bank accounts were in negative. If people witness negative results on savings they would logically stop saving.
He quoted a study that indicated negative returns totaled as high as 19% and if fees for return debit were considered negative returns totaled as much as 43%.
"The end result is that people do not save money and when they need it, they have to take loan, which invites debt," said an analyst at RNCOS.
A study quoted by Independent News & Media, indicated that revenue made by banks and other financial institutions from fees totaled to around US$ 4.2 Billion (31 Billion Rand) in 2004. The study urged an investigation, as it stated there appeared a little relation between transaction costs and the bank charges.
Banks pay yearly & once-off charges for participating in NPS (National Payment System) & average cost is US$ 13.36 Million (98.5 Million Rand) for large banks, excluding the handling services.
Nedbank, one of the four major banks, has reduced its banking charges as a result of the inquiry. In the submission to commission, Nedbank said that their decision to curb bank charges was among the several initiatives for retaining & attracting customers in extremely competitive market.
The hearings, currently being held in Pretoria, will also be conducted in Durban & Cape Town with more hearings scheduled in March & April 2007. First National Bank is scheduled next for the hearings.
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