A step in the right direction

Tita C. Valderama

Tita C. Valderama

THE recent decision of the Monetary Board (MB) to tighten the rules on dormant deposits and bank fees is a step in the right direction to protect the public from ridiculous charges.

According to Bangko Sentral ng Pilipinas (BSP), its policy-making board had set the dormancy fee at a ceiling of P30 a month, which is a significant drop from the current P200 and up charged by banks on bank accounts that have no deposits or withdrawals for two years.

Not only that, MB also extended the period before an account is considered dormant to five years, from the current one to two years.

Also, banks are now required to notify dormant account holders of the status of their accounts in three instances: before the start of the dormancy period; when the dormancy fee will be imposed; and when the account will be placed under escheat or when it will reverted to the National Treasurer in line with the Unclaimed Balances Act.

The BSP said a depositor must be informed through mail, courier delivery, electronic mail (e-mail) telephone call and other means 60 days before the account becomes dormant and 60 days before the imposition of dormancy fees.

In a press release posted on its website, BSP said the decision was in line with its Consumer Protection Framework. It was indeed a fitting move in observance of Consumer Month.

If it is not asking too much, perhaps the MB should also review the rules on savings deposits and loans, given the pittance rate that banks give on savings while interests on loans are a bit excessive.

Interest on savings is at a measly 0.75 to 1 percent while interest on personal loans is pegged at around 35 percent. Worse, interest earnings from bank deposits are charged a 10 to 20-percent creditable withholding tax, which even reduces the net yield even more.

The very low interest on savings is one reason why the savings rate in the Philippines is low. A 2013 survey by BSP showed that only one out of four Filipino households maintain savings, indicating the vulnerability of the majority to risks emanating from emergency situations that require spending.

The same survey shows that among the households that maintain savings, a significant 40 percent still keep their extra money at home rather than depositing them in banks.

The survey, conducted nationwide from January 21 to February 1, 2013, covered 5,670 households and had a response rate of 96.9 percent.

Our old folks have a saying, “kapag may isinuksok, may madudukot.” In the olden days, we were told that our grandparents kept pieces of bamboo that they used as piggy banks. Others had secret holes in their walls where they slipped crisp bills or coins. They break those when the need arose, like when somebody falls ill and needed to pay hospital bills, or to pay for a beloved grandchild’s tuition. In those days, banks had few branches, especially in the rural areas.

But in these days when there is at least one bank branch in every street corner, or in a town, maintaining a savings account still does not seem to be attractive. One reason is unattractive interest earnings. For low-income families, another reason could be that their salaries are barely enough to sustain their basic needs.

Of course, higher savings mean that consumers have cushions to help them absorb emergency expenses without digging the hole deeper or borrowing from banks that carry far higher interest rates. But when income is barely enough and the savings rate is too low, you can’t encourage people to save their money in the banking system.

Efforts of the BSP on economic and financial literacy campaigns, which involve the conduct of road shows in various provinces and in other countries hosting overseas Filipino workers, would be more effective if interest rates on savings accounts are attractive enough.

Catchy jingles of banks would be worth the handsome amount they pay to advertising agencies if these would mean meaningful sharing of their huge profits with consumers in the form of higher interests on savings deposits. That way, we can say that banks are truly on your side.

Banks exist not solely for the purpose of generating as the highest profits possible. They ought to give back meaningful returns, not pittances, on deposits.

An indication that banks are earning much, while depositors get measly amounts in interests, is the fact that banks are among the largest and most profitable companies not only in the Philippines, but in the world.

Aren’t bankers bothered by their conscience when they live in luxury from profits out of bank earnings from people who borrow money to pay another debt? Or from the earnings on interests of hard-earned money that people entrust to them in savings accounts?

Don’t you think it is about time for the MB to take a serious look at the interest rates on savings accounts and the tax on interest earnings? Even if Consumer Month is observed only in October, it is not wrong to be consumer-oriented during the rest of the year.


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  1. The banking system in the Philippines is actually choking the growth of small businesses and entrepreneurs in the country. Hindi umiikot ang pera kasi napaka hirap umutang at ang requirements ng mga banko ay tonelada ang bigat sa aplikante. Example, kailangan ko bumili ng isang service na sasakyan pang delivery, maliban sa requirement na malaking down payment na halos puede na pang dagdag na capital for business expansion mapupunta lang sa down payment. IN the US it does not cost a roof and a wall of the store to buy a car or borrow an additional amount when there is sufficient collateral. That is the reason why some multi million dollar companies in the US started from garage on a borrowed equity from the borrowers’ house.

  2. Please highlight also the fees the Banks impose on late payments, past due accounts, credit card bills.

    3% a month is not fair at all, the borrowers are hardly encouraged to redeem their collaterals and the charges are also raised further by attorney’s and collection fees, a deluge really.