Rural banks minimum capital to hit GH¢300,000

The minimum share capital required by all Rural and Community Banks, (RCBs) in the country will be revised from its current level of GH¢150,000 to GH¢300,000, Mr. Franklin Belnye, head of the Banking Supervision Department of Bank of Ghana has hinted.

Notification to this effect will soon be issued by the Bank of Ghana, with a time-frame for all RCBs to comply.

The upward review of the capital requirement has become necessary because, according to Mr. Belnye, capital is the lifeblood of any viable banking institution - and the more the better.

In today’s computerised world, appropriate re-tooling to deploy the right technologies for efficient service delivery cannot be done without adequate capital. The Bank of Ghana sincerely hopes that shareholders and directors will put in all the effort needed to meet the revised statutory minimum capital when it comes into effect.

Mr. Belnye made these known at the 12th National Managers’ Conference of the Rural and Community Bank and the Apex Bank held recently in Ho at the Ho Polytechnic. The conference was on the theme “Making the Rural and Community Banks more Efficient to improve Customer Satisfaction”.

The Bank of Ghana revised the minimum paid up capital of RCBs from GH¢50,000 to GH¢150,000 in 2008 with a flexible time-frame for RCBs to comply; but RCBs were not supposed to pay dividends or open branches unless able to meet the minimum capital requirement.

For about five years now, a number of RCBs are yet to meet the previous deadline -- even though in the last few years a number of RCBs have made efforts to close the gap.

Unfortunately, some rural banks have still not been able to meet the revised minimum capital requirement.

Currently, the industry boasts 139 rural banks spread over the entire country, with a total asset base of over GH¢1.65billion as at May 2013 -- or just about 5% of banking system assets.

At the end of May 2013 deposits of RCBs stood at GH¢1.2billion with total loans and advances amounting to GH¢650million, while investments in government securities stood at GH¢480million. The loans were granted principally to traders, farmers, artisans and operations in the SME sector of the economy -- mostly customers who could not otherwise obtain credit from the traditional banks.

Conclusively, the RCBs made very significant and positive impacts in the lives of the country’s rural population. Mr. Balnye, touching on the evolving competitive environment, said there is need for rural banks to reposition themselves to meet the challenge. He mentioned the expanding branch network of banks, savings and loans companies, and microfinance companies - saying the hitherto captive market for rural banks is fast-disappearing.

He gave advice that the RCBs must compete on service quality, cost-effective pricing, and customer satisfaction to survive in this new competitive environment.

He finally advised all RCBs not to shy away from the competition, but to rather brace themselves for it by designing appropriate products and services as well as training and staff motivation.