Banks quick to charge more but slow to pay higher interest to clients

Lihle Z Mtshali

Lihle Z Mtshali

Commercial banks announced they would be charging higher interest minutes after the Reserve Bank hiked its repo rate 0,5 percent last Thursday. However, they have not shown the same urgency in paying savers more.

One of Reserve Bank governor Tito Mboweni's motives in raising interest rates is to encourage South Africans to save more and borrow less.

A look at the savings rates of local banks, however, shows we are given little incentive to save. The interest banks pay is generally well under this country's 6,4 percent official inflation rate.

Government's central bank is supposed to be commercial banks' lender of last resort. To avoid inflation caused by government "printing money", commercial banks are supposed to first try and raise their capital requirements from the public by offering attractive savings rates, then from each other at the Johannesburg Interbank Agreement Rate, and only lastly from government at the repo rate.

But judging from their savings rates and the slow pace in adjusting these, South African commercial banks don't seem to be making much effort to look for sources other than the central bank.

Nedbank yesterday said it was still in talks to decide if it would adjust savings rates, but said it normally reviewed its interest rates at the time of repo rate increases.

First National Bank said it had increased its savings rate which ranged between two percent and three percent on balances below R10000. Absa said its highest rate on balances of less than R10000 was 5,5 percent.

Capitec Bank and Standard Bank offer an above-inflation savings rate with one of Standard Bank's saving products paying seven percent on balances lower than R10000.

"We offer 10 percent interest on balances lower than R10000 and have been offering those rates since the bank's inception four years ago," said Riaan Stassen, Capitec's chief executive.