Minimum Capital of RCBs to go up - BoG

The minimum capital of Rural and Community Banks (RCBs) is to go up from GH¢150,000 to GH¢300,000, the Bank of Ghana (BOG) has hinted.

According to Mr Franklin Belnye, Head of Banking Supervision Department of BOG, “Notification to that effect will soon be issued with a time frame for compliance”.

He gave the hint at the 12th National Conference of RCB Managers in Ho under the theme: “Making the Rural and Community Banks more efficient to improve customer satisfaction.”

In 2008 the minimum capital of the RCBs went up from GH¢50,000 to GH¢150,000 “with a flexible time frame for compliance,” as a condition for paying dividends and opening new branches.

Mr Belnye explained that the revision had become necessary because “capital is the lifeblood of any viable banking institution and the more the better.”

“It is unfortunate some RCBs have still not been able to meet the revised (2008) minimum capital requirement,” he said.

“In today’s computerized world, appropriate re-tooling to deploy the right technologies for efficient delivery cannot be done without adequate capital,” he added.

Mr Belnye noted that the BoG, therefore, looked forward to the “shareholders and directors” to exert efforts to meet the revised statutory minimum capital when it comes into effect.

He stated that a double digits non-performing loan (NPLs) of RCBs was also a major source of concern because it led to further erosion of capital.

The BOG’s analysis of NPLs in RCBs, according to Mr Belnye, showed a predominance of poor risk management practices, information asymmetry between lenders and borrowers, leading to high interest charges which precipitated delinquency.

He said the BoG had been in touch with the ARB Apex Bank and the Credit Bureaus to work out modalities for RCBs to submit data to the Bureaus as required by law and also use the services of the Bureaus to improve credit decision making.

So far, he revealed that only 35 RCBs were using the services of the Bureaus.

“The posture is unacceptable given that all the RCBs are now computerized and very well positioned to use the services… the Bank of Ghana will consider penalizing RCBs that fail to submit credit data and use the services of the bureau in credit decision.”

Mr Belnye stated that it had become imperative for RCBs to be able to match the competitiveness in the financial market which was no longer a “captive market.”

He commended the RCBs for igniting business activities and development in the rural economy, savings habit, community development initiatives and employment opportunities.

Mr Belnye, however, reminded them that their survival in the new financial market depended on the adoption of good corporate governance practices and strong risk management to outwit fraudsters.

The Managing Director of ARB Apex Bank Limited, Mr Kwadwo Aye Kusi said that “Without satisfied customers, you cannot stay in business. The days of customer loyalty are over and we must endeavour to build good corporate image to ensure continuous patronage of our products”.

Mr Kusi said the ARB Apex Bank “is proposing the design and acceptance of a common logo for the promotion of products.”

Togbe Binah Lawluvi VI, Chairman of the Association of Rural Banks in the Volta Region, in a welcoming address said RCBs were strategic to the development of the rural economy.

He said RCBs' role in the rural economy would further be enhanced when the infrastructure deficit of the rural economy was addressed.

The five-day conference would brainstorm on the establishment of the Rural Banking College and way forward, impact of national managers’ conference and their frequency, high staff turnover, causes, impact and remedies, reporting requirements for fraud, terminations and dismissal and common logo for RCBs for promotional activities.