Yunus Carrim. Picture: GCIS
Yunus Carrim. Picture: GCIS

Treasury has provided the Reserve Bank with the power to guarantee retail deposits in VBS Mutual Bank — now under curatorship — of up to R100,000 per depositor, the bank announced on Wednesday.

This doubles the previous guarantee of R50,000 per depositor and will greatly assist the thousands of poor people who invested their life savings in the bank.

The bank said VBS curator Anoosh Rooplal would continue to collect on loans due to the bank. “Individuals and entities with loans at VBS Mutual Bank are expected to continue to make payments on these loans,” VBS said.

The move comes as ordinary depositors have been having a hard time getting their money out of the bank.

Parliament’s standing committee on finance has expressed deep concern over the way depositors are being treated and has urged VBS management, Rooplal, regulators and Treasury to intervene.

Elderly pensioners and other people are reportedly queueing all night in bitter cold to withdraw up to the maximum of R1,000 allowed per day.

There are about 12,000 individuals who have deposits of R154.3m — their life savings — with VBS, which was placed under curatorship in March. This was after the bank experienced a liquidity crunch when municipalities tried to withdraw funds they had illegally deposited with the mutual bank in contravention of the Municipal Finance Management Act and Treasury instructions.

Municipalities have R1.6bn deposited with the bank and 9,261 groups such as stokvels and burial societies R232.5m.

Until Wednesday, the Bank guaranteed deposits of R50,000 per depositor but a daily limit of R1,000 was placed on withdrawals. The curatorship has already revealed deep financial mismanagement of the bank, with R900m having disappeared due to fictitious deposits and/or untraced lending.

On Wednesday, finance committee chairman Yunus Carrim said the committee understood the bank was in a dire financial situation but questioned why the release of money could not be managed in a more efficient and humane way.

“As usual, with the failure of a bank, it’s the poorest depositors who are suffering disproportionately and bearing the worst burden,” Carrim said. “It’s just not acceptable that elderly pensioners and other poor people are having to queue through the night … and have to return regularly to do so.

“Instead of withdrawals of up to a R1,000 a day, why is it not possible to increase the ceiling and reduce the number of withdrawals a depositor can make per week? There are other ways that can also be considered to manage the process better and we urge this be done.”

The committee also believed that the government needed to finalise a bill on a comprehensive deposit insurance scheme so the funds of depositors could be safeguarded in the case of a bank collapse. “We also want to see the full overall inquiry into what went wrong at VBS and how this happened finalised expeditiously,” Carrim said.