Devise means to revive distressed RCBs – ARB appeals to BoG

Simon Nero Davor President, Volta Chapter, ARB

The Association Rural and Community Banks (ARB) has asked the Bank of Ghana (BoG) to come to the aid of rural banks that are in distress rather than closing them down.

President of the Volta Chapter of the ARB, Mr. Simon Nero Davor, said a number of rural banks are facing challenges in the country, and suggested that the regulator, Bank of Ghana, should help them to recover.

He observed that the social impact on rural economies if these banks are closed down will be disastrous; such as the loss of deposits by people, job-loss, and collapse of rural enterprises.

The call by the ARB comes at a time the central bank has directed banks in the country, including rural and community banks, to raise their minimum paid-up capital by end of the fiscal year.

RCBs, for instance, are to up their minimum paid-up capital to one million Ghana cedis.

Some sources close to the BoG sas so far only about 40 rural banks out of the about 140 RCBs in the country have met this requirement. This, among others, has led to a number of appeals to extend the deadline for rural banks, especially.

Speaking at the recent ‘National Managers Conference’ of the rural and community banks in Ho, Mr. Davor, touching on a number of concerns of the industry, used the occasion to appeal for the BoG to be considerate with the level of penalties being imposed on RCBs.

“A penalty imposed which cannot be paid or that can lead to the collapse of a bank is not worthwhile.”

He noted that this is not to suggest that they should not be sanctioned, but rather asked the regulator to be considerate.

He further said despite some past reductions in the IT cost of rural banks, it is still high and beyond the reach of some rural banks. He therefore asked the ARB Apex Bank to reduce it further to improve the operational efficiency and performance of RCBs.

He also drew the attention of the apex body for rural banks that the processing time of salaries for RCBs is too long, making them lose out on this product to the universal banks.

Mr. Davor said: “In most cases, the bulk amounts were credited to the banks without beneficiaries names and amounts in the FTP to enable banks process and pay those salaries on time”.

He also charged government to leave a legacy by decreeing that funds to local assemblies must be channeled to them through RCBs.

“It is disheartening to see government channeling all its funds, especially DACF, through the universal banks – but anytime those assemblies need support for national events like Farmers Day celebration they write to the RCBs for assistance,” he stated.

He asserted that loans to government contractors account for a significant percentage of the Non-Performing Loans on the books of RCBs, and asked that government act to help address this challenge.

The National Managers Conference was organised unnder the theme ‘Making Greater Impact in the Rural Banking Industry through Innovation and Collaboration for Sustainable Growth’.

RCBs were urged to increase their share capital to improve their capital base and liquidity.

By Seth Krampah l l Ghana

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