Banking Hall Charges: An Unfair Price Paid By Customers For The Bank’s Inefficiencies
Commercial banking serves a number of functions that are important to the socio-economic development of Ghana. Among these functions, two principally stand out: (1) the mobilisation of funds from which further investments can be made and (2) the apparent securitisation of savings for those that deposit their moneys with the commercial banks.
Generally, Ghanaian commercial banks pay relatively appalling rates of interests of savings kept with them. For one to be able to negotiate and/or earn higher rates of interests on their savings, they normally need to be able to do either/both of the following. Firstly, one needs to hold their money with the bank for guaranteed minimum periods, with little to no possibility of withdrawal within such periods, or secondly, for one to be able to hold sufficient cash reserves to be able to negotiate rates to be paid on their savings. These may be simplistic representations, but do serve to explain the foundations necessary for this opinion piece.
The economy of rates paid on savings already begins to look stacked against a higher proportion of the socio-economic demography of the Ghanaian population. A significant fraction of the Ghanaian population rarely engage in exploring ways to earn higher returns on their savings, partly due to them not being very well informed of the possibilities to do so. Secondly, rarely do people hold so much cash in their accounts. This is especially the case in the impoverished parts of the country where banks paradoxically, stand to make important contributions to their socio-economic development.
Conversely, the funds that banks mobilise are lent at absurdly exorbitant rates, in relative terms, to parties that need short and long-term finances. But then, those are the present terms of their business, a critique of which would be deferred to a later date. Logically thus, banks in theory should be striving to retain as much funds with them as possible, as that gives them a foundation to earn higher rates of return. In addition, successive governments have and continue to strive to move the economy towards a cashless system; in the spirit of which the Gh-Link system and E-zwich cards were introduced.
Yet what we see is that banks, especially those with state ownership such as GCB and ADB, continuing to pursue policies that are illogical in principle, and strikes at the heart of economically impoverished in the society. Two of such policies include charges for savings withdrawal slips within the banking hall, and the operation of minimum balances on savings accounts. I single out state owned banks because their objectives should not necessarily be limited to profit maximisation, but should extend to improving overall public good.
Take for example the charges for withdrawal slips. Banks that operate these charges assume that people should firstly have withdrawal slips at home or carry such slips with them round the clock, and secondly plan exactly when they need to withdraw money and remember to take such slips with them to the banking hall. This policy automatically banishes the possibility of making emergency withdrawal without incurring as charges, about the equivalent of the daily minimum wage. For the average Ghanaian, this charge is exorbitant. In the meantime, the bank is charging the customer to withdraw his/her own money lent to it the bank.
The effect of this is that people withdraw and keep as much cash as they can, so they don’t have to repeatedly visit the banking hall and/or incur more charges, thereby defeating efforts of moving towards a cashless economy. Doing so paradoxically increases the risk of losing one’s money, in the unfortunate case of a robbery for example.At the same time, those in lower-income brackets feel the effects the charges the most, charges which could have aided in the satisfaction of their basic physiological needs.
If the objective for this policy was to reduce the number of banking hall transactions, then that is immediately negated by the unreliability of ATM services outside of banking halls, the (sometimes) exorbitant ATM charges placed on transaction, etc. These issues related with ATM banking again negates any attempt at moving towards a cashless economy.
The minimum deposit policy, where customers are required to keep stipulated minimum amounts in their accounts, also has similar effects. How and why would a borrower (the bank) be able to tell his creditor (the saver) how much of his debt can be repaid lest they end their economic relationship? The tendency of banks to dictate how much money should be kept in accounts is counter intuitive to the freedoms that should come with property ownership. Again, we have repeatedly seen people that crave to withdraw emergency cash from their accounts, but are told they cannot withdraw their own savings, because the funds left in the account are the minimum required balances. In some cases, these balances are even revised for existing customers, with little to no input from such customers.
Some might argue that there is competition in the market and customer are at liberty to change their banking services providers. However, we do know that in most places, especially outside of principal economic districts and regional capitals, we have a limited variety of banks that could offer any real competition. Besides the pinch of these policies is felt the most by those in the lower economic echelons, who may as a bonus have very little financial literacy. They possibility to they being able to plan and execute their own banking decision tends to be limited thus. Besides, these policies, in the way they affect those in the lower economic bracket, seem to possess a tinge of inequity, which shouldn’t be the case.
Finally, it should not be the customer’s responsibility to finance the inefficiencies of banks. Whatever those charges and restrictions are meant to achieve, they are borne out of the inefficiencies of such banks. If other banks do not operate those policies, why should those that do be justified in their charges to customers? Banks often pride themselves to be the powerhouses of innovation, yet some seem oblivious to the need to innovate and eliminate some inefficiencies in all aspects of their operation.
By: Nurudeen Haruna