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Banks remove charges, hike interest rates to remain in business


News » Health and Beauty
Nigeria

August.04.2014

Regulatory induced costs typified by dwindling revenue is making most banks to shelve charges as well as raise interest rates in some cases so as to remain in competition, BusinessDay investigations have shown.

Banks have through e-mails and short message services (SMS) informed their customers about the removal of some charges and the current rates they are now offering.

One of the messages from one of the banks reads: “Dear Mr. & Mrs. … to serve you better the N200 monthly fee on your gold current account has been waived effective May 2014.”

Another one reads: “Dear Customer, interest rate on savings is now 3.6 percent per annum. Earn more by funding your account.”
“We are thinking of encouraging our customers to deposit with us through the possibility of increase on interest paid on deposits. This will guarantee cheap funds that will enhance our deposit base,” an operator had said.

In recent weeks, deposit money banks have inundated their customers with messages of removal of some charges, like the N200 previously charged on dormant account, while others have intimated their customers of upward review of interest rates on savings from 2 percent to 3.5 percent per annum.

Generally, half year results released so far by some of the banks showed reduced profits, net margins and higher cost to income ratio, confirming the deteriorating level of efficiency and profitability.

Some analysts said last night that apart from removing charges and raising interest rates, most of the banks need to put their technology, distribution platforms and sales channels to better use in order to improve efficiency and boost line performance.
“We are thinking of encouraging our customers to deposit with us through the possibility of increase on interest paid on deposits. This will guarantee cheap funds that will enhance our deposit base,” an operator told BusinessDay last night.
Kenneth Iwelumo, financial expert, said banks must put on their thinking caps to break barriers hitherto existed between them and deposit mobilisation.

Iwelumo observed that the tendency of exploiting customers to make profit is no longer fashionable, particularly in a country that is campaigning for financial inclusion.

Friday Ameh, energy analyst, said that in a country with large number of financially excluded people, the only way out is for banks to encourage their customers.

Ameh further said that the current move by banks was forced on them as, according to him, most of the customers have been migrating from one bank to the other in recent times following higher charges by them.

He said that this has resulted in the increase of dormant accounts, a development that is impacting negatively on the bottom-line of the banks.

Before now some banks were offering accounts that are supposedly Commission on Turnover (COT) free and imposed a maintenance or similar fee not covered by the Revised Guide to Bank Charges.

Investigation shows some banks were charging their customers minimum of N200 monthly as maintenance fees. They also charge COT Value Added Tax (VAT) monthly, among others.
This practice, analysts say, is not healthy for a country that has a goal to reduce the number of financially excluded adult population to 20 percent by 2020 from 46 percent it was in 2010.

Article Credit: Businessdayonline

Updated 4 Years ago
 

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Tags:     Banks     SMS     Dear Customer     Friday Ameh     Kenneth Iwelumo    

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