Saturday, June 3, 2023

Inside how banks cheated customers through hidden charges

Following the lifting of a moratorium on upward adjustment of bank charges by the central bank earlier this year, fresh information has emerged showing that atleast eight commercial banks have been cheating on their customers through hidden and unapproved charges.

An investigation carried out at the country’s leading commercial banks by the central Bank with the help of four local public accounting/audit forms has revealed that all the country’s commercial banks in the country except two, had not levied charges as approved by the regulator and as per their tariff guides.

However in a bid to foster cost-effectiveness of banking services, Bank of Botswana imposed a two-year freeze on upward adjustment of bank charges and fees with effect from January 1, 2014. At the same time, the Bank decided that during the moratorium period, an independent third party would be engaged to investigate whether the fees and charges levied by banks were as approved and in accordance with published tariffs.

The move was a response to growing public concern about the high level of bank charges and fees, which are considered not commensurate with the quality of banking services and products.

A recently supervisory report published by the central bank states that although most banks had not levied charges as approved by the Bank, “the level of transgressions differed from bank to bank”.

The bank of Botswana moratorium on bank charges was lifted in January this year. The bank says that the “lifting” of the moratorium has been done on a case by case basis, subject to each bank fully normalising its violations.

“The Bank will make an assessment as to whether each bank has appropriately reimbursed its customers.”


The outcome of the investigations comes hardly a few months after the another review of bank charges carried out by the Botswana Institute for Development Policy Analysis (BIDPA) showed that some commercial banks in the country do not adequately make available to its customers information relating to service charges. 

In a special briefing published in February 2016, BIDPA said it has observed that for some of the local commercial banks, the data relating to service charges are neither readily available nor accessible to the public. 

“This phenomenon is particularly prevalent at Bank of Baroda and the State Bank of India. For instance these banks have not listed service charges for transactions such as over the counter cheque deposit and provision of a bank guaranteed cheque. Being deposit taking commercial banks, it should be a given that these banks would provide these services,” BIDPA researchers revealed. 

Another observation made by BIDPA is that although bank charges differ from one bank to the other, in some cases the differences are vast. In its data breakdown, the government think-tank shows that Standard Chartered Bank Botswana is one of the banks that is “costly” to bank with.

A hypothetical basket of services used by BIDPA researchers indicates that over a twelve month period, a hypothetical customer at Standard Chartered Bank Botswana will pay a total of P890 for cumulative services which entails monthly Account maintenance fee, interim statement, copy of deposits amongst others. At the same time, its competitors First National Bank Botswana (FNBB), Barclays Bank Botswana (BBB), Stanbic Bank charge its customers P394.16, P546.88 and P514.74 respectively for similar services. A further look at the data shows that the costs for withdrawing cash from commercial banks differ by types of transactions and across different banks. 

BIDPA researchers, Johnson Maiketso and Kedibonye Sekakela have observed that, generally it is more costly to withdraw cash over the counter and through cheque encashment. The data breakdown shows that while Barclays and Standard Chartered Bank do not charge their customers for withdrawing cash through their Auto Teller Machines (ATMs) they charge P19.69 and P20.00 respectively for cash withdrawal over the counter. At the same time, a further look at other banks shows that over the counter withdrawals for FNBB and BancABC are more than seven times those for the ATMs while for Stanbic Bank the charge is more than four times. 

A comparative study carried out by BIDPA in 2003 concluded that bank service fees in Botswana were generally similar and high across the banks, making it difficult for customers to choose between them on the basis of bank charges. However BIDPA says most banks in the country should consider revising these charges to reflect the true cost of offering these services to their customers. 

At the same, BIDPA says Bank of Botswana, as the regulator must consider mechanisms to enhance consumer education including encouraging commercial banks to make information on their charges available.

Meanwhile Bank of Botswana says that it has decided in all cases where the violations had been noted, the concerned banks should identify and reimburse all the affected customers.


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