Online Reporter
Lovemore Kadzura
Post Reporter
RESIDENTS of Mutare have welcomed proposed amendments to the Deposit Protection Corporation (DPC) Bill, saying the new provisions will strengthen the corporation’s mandate to safeguard depositors in the event of bank failures.
The proposed Bill compels banks to make the first compensation payment within seven days of closure and extends insurance cover to depositors of microfinance institutions and building societies.
The Parliamentary Portfolio Committee on Budget, Finance and Investment Promotion held a public hearing in Mutare yesterday to gather public views on the proposed legislation.
In an interview, the committee’s chairman and Chipinge East Member of House of Assembly, Honourable Lincoln Dhliwayo said the Bill addresses critical legal gaps in the current law meant to protect depositors’ funds.
“This Bill looks at how best we can insure our deposit against bank failure and insolvency. Here in Mutare we have received quite a good number of submissions that came up out of the members of the public. The people said the first compensation payment of US$3 000 in the event of bank failure was too little and they suggested that it is reasonable if DPC uses a percentage rather than a fixed figure.
“They also said the compensation must first be paid to low income groups. There was submission to the effect that the exchange rate on the day of bank closure should be applied as opposed to the on the day of pay out of compensation. People emphasised that depositors should not suffer value loss,” said Honourable Dhliwayo.
Contributors at the hearing argued that the current proposal, while an improvement on the previous US$1 000 threshold, still falls short of what depositors and businesses require to remain afloat during liquidation.
Chief executive officer of Mutare Community Share Ownership Trust, Professor Hardwork Mukwada said the Bill must also tackle excessive bank charges that are eroding confidence in the banking sector and discouraging savings.
Professor Mukwada added that the law should explicitly provide for interest to accrue on protected deposits, arguing that this would promote saving culture and incentivise people to keep money in formal financial institutions rather than in cash.
Small business operator Mr Dominic Bvunzawabaya said the proposed US$3 000 first payout would be inadequate for traders and SMEs whose working capital is often banked.
Other residents who made submissions called for priority payouts to low-income earners, pensioners and vulnerable groups, arguing that they are least able to absorb shocks from bank failures.
There were also calls for DPC to use the prevailing exchange rate on the date of bank closure, rather than the rate on the date of payout, to prevent depositors from losing value due to currency fluctuations.
Honourable Dhliwayo said the committee had taken note of all submissions and would consolidate them into a report for consideration by Parliament. He stressed that the Bill seeks to modernise deposit protection in line with regional best practices and to restore public confidence in the financial sector.
