BARELY two months into the effective date for the commencement of the stipulated interest rate on savings deposits in banks, majority of the financial institutions have defied the directive.
According to investigations, the directive contained in the “Revised Guide to Bank Charges”, which was released in March 2013, by the Central Bank of Nigeria (CBN), with effective date of April 1, may have appeared optional for some deposit money banks as they choose various rates to implement or sustain status quo.
According to the guideline, all deposit money banks are to pay interest on savings deposits to the tune of 30 per cent of the subsisting Monetary Policy Rate. This means that at present, all banks are to pay 3.6 per cent on savings accounts.
But CBN’s publication on Average Deposit and Lending rates of banks as at May 24, showed that the banks ignored the directive, with few paying the stipulated per cent, while others took to the pattern of “free for all.”
For example, Heritage Bank took the lead with 4.29 per cent average interest rate on savings deposits, overshooting the stipulated 3.6 per cent with 0.69 per cent.
Similarly, Access Bank, Citi Bank, Ecobank, Enterprise Bank, GTBank, Stanbic IBTC Bank, Standard Chartered Bank, Sterling Bank, Union Bank and Zenith Bank joined the league of early compliants, with the stipulated interest rate of 3.6 per cent.
However, Diamond Bank opted for 3.25 per cent; Unity Bank, three per cent; Wema Bank, 2.45; Fidelity Bank, two per cent; with three banks paying less than two per cent, while three pay one per cent or less.
The apex bank said that the new guideline, which supercedes that of 2004, was meant to provide a standard for the application of charges in the banking industry and minimize conflicts between banks and their customers.
While the guideline also stipulated a negotiation of interest rates between banks and their clients on certain deposits and lendings, savings deposit was meant to be strictly followed.
Meanwhile, stakeholders have expressed worry over the slow pace of adoption of rules that seek to protect customer/consumer rights, especially in the financial system.
The Lead Director, Centre for Social Justice, Eze Onyekpere, said: “This shows that human conduct is to a great extent dictated by self interest and that the alternative courses of action available to human institutions gives them a choice in decision making.
“However, since the directive of the Central Bank is the norm that should be obeyed at the pain of punishment, there is no discretion on the part of any bank to disobey the instruction. It is therefore, incumbent on the CBN, being the regulator, to devise and apply adequate sanctions in view of the gravity of the disobedience.
“For the banking public, the implication is that those who have been treated in a manner contrary to the CBN directive have a right to insist on a claim on the offending banks to turn over the withheld sums of money.”
An Abuja-based Development Consultant, Jide Ojo, said that the action touched on four fundamental issues – breach of customer rights, ethics, corporate social responsibility and failure on the part of the regulator to imprint its seal of authority in its directives.
“The regulator ought to have known that these banks would naturally not want to comply, because it is a loss to them, so to speak. The Chartered Institute of Bankers of Nigeria has also not done well to the point that its existence seems to be in doubt. The issue of ethics should have been championed by it, but it has always looked the other way.
“I have said that the system we operate here does not encourage investment nor support its own policy. For the fact that it is a directive from the regulator, it should be obeyed and enforcement ought to have started immediately. Assuming the directive was that no interest should be paid on savings accounts, would it take them time to adjust their systems?
“The culture of impunity in the country has pervaded every aspect of our national life. Directive is not suggestion and all involved are expected to implement it at the same time. Why were some banks obeying, while others are foot-dragging? It is only in Nigeria that this obtains and that is regulatory failure.”
But the Head of Consumer Banking in one of the top playing banks in the country, though gave reasons for low interest rates in savings account, also said that the bank complied immediately the guideline was released.
In the words of the banker: “Interest on savings account does not work the way it is seen outside the bank. If you have a savings product, there is a treasury department that actually manages the accounts.
“What is bank in the business of lending, except that it takes depositors money and lend to its customers. But in savings account, you can come back any day and at will, to demand for the money and for that, we cannot lend out the money to a customer for a longer period and take high interest from the customer.
“So, what can be done with savings deposit is extremely limited and we are not really getting much from it, hence interest attached to it is always lower than that on fixed deposits. But the new Central Bank guide on charges and fees stipulated a minimum rate to pay on savings account deposits, which is linked to the subsisting Monetary Policy Rate. All the banks adopted that and my bank has complied.”
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